Owners title insurance is intended to protect a new home buyer from monetary loss due to issues with the title not found prior to the sale of the home. Not all problems with titles are easy to find and/or identify, so title insurance protects you from claims made against the home or property having to do with anything before the completion of the sale of the home. Examples could be unpaid taxes by the previous owner or contractors trying to collect on monies owed for work done on the home preceding the sale.

There are two types of title insurance. Lenders title insurance and owners title insurance. Lenders title insurance is intended to protect the money the lender is mortgaging, not the owner or the owner’s money, from any legal issues that should have prevented the current owner from transferring the title of ownership rights. Lenders title insurance does not protect the buyer from anything. The only thing it does do for the purchaser is ensure that a title search was done. While a title search does offer the buyer some assurance, it does not protect them from being sued or being evicted from the home if something does surface later on. A title search is a review of public records to evaluate and verify legal ownership of the property and to look for any liens against the property.

While owners title insurance is not required in New Jersey and can be purchased after the sale of the home is complete, it is highly recommended to purchase it at the time of closing. It is commonly less expensive to purchase the title insurance before the sale is final versus after. It is a one-time purchase and is not something that ever needs to be refreshed or reevaluated. The cost of the insurance is based on the price of the property.

There are big risks that come along with choosing NOT to get owners title insurance. As previously stated, if it should be found out after the sale of the property is complete, that the previous owner owed back taxes on the property and the new buyer declined to get owners title insurance, the new owner will be taking on the financial burden of those taxes owed. A buyer also runs the risk of losing their new home if it is found that the original seller did not have the legal right to sell the property in the first place. While uncommon, it does happen and the only way to protect yourself is by purchasing owners title insurance.

Items that owners title insurance typically covers can include, but is not limited to:

• Legal ownership by someone other than the seller
• Fraud on documents having to do with the property
• Clerical errors in filing or recording paperwork for the property
• Outstanding liens or lawsuits
• Undocumented easements

Those are just a select few items that owners title insurance can protect you from and this article really only grazes the topic of owners title insurance. We hope this has helped make understanding it a little easier, but all of our agents are always here to help.  Be sure to  contact us anytime and we will be happy to answer any questions you may have about this or any topic having to do with real estate!