Buying a home is a thrilling time in your life, but it’s also full of lots of red tape and expenses, especially when you’re investing in a condo. You want to make sure you follow the letter of the law and cover your property (and those around you) from potential damage. However, you don’t want to pay for anything that isn’t necessary.
Someone has suggested title insurance, and you’re unsure as to whether this policy is wise or not. When you have a reputable agent, like those at Sunnyside of New Jersey, they’ll give you the pros and cons of your unique situation. However, it’s a good idea to know the basics yourself.
This article will explain what title insurance is and why you may need it when you’re buying a condominium.
Insurance is always designed to protect you in the event of a loss or damage. In the case of title insurance, this coverage keeps you safe from another potential owner stepping in to claim that they have the right to your condo’s title.
Before you buy a home, whether it’s a condo or something else, a title company performs a title search. This is a review of any publicly available records that might show that the seller doesn’t have the right to sell the condo. For instance, they may have a claim against them from a debtor in which the title was used as collateral.
This search extends from the title and goes back thirty years. The title company will review any deeds, tax liens, divorce cases, county land records, or other financial judgments that might affect the seller’s free-and-clear right to the condo. If nothing is found, the title company issues a commitment that states they performed a search and found nothing preventing the sale from occurring.
Even after the sale is over and you’re living in your home, rare disputes can occur. This is usually when something arises that questions your right to the property. Maybe there was an error made on the title. Or, perhaps, one of the entities involved in the sale is now under investigation for fraud and your purchase fell into the period in question.
While these instances aren’t common, if they do occur, they can be devastating. Title insurance protects you, the owner, from these claims.
Most mortgages require lender’s title insurance. This coverage protects them from financial responsibility if it turns out that you don’t actually hold the title. It’s an expensive bit of protection that keeps their investment in your home safe.
However, owner’s title insurance protects you from any errors in the title that weren’t obvious during the inspection. It’s not typically mandatory, but it does give you that extra peace of mind.
So how does title insurance protect you as a condo owner?
This coverage ensures that if there’s a lien out there holding the title back from being clean, you aren’t responsible for those damages. So, should a tax lien still exist from a previous owner’s federal tax responsibility, the insurance handles the claim.
Additionally, if condominium developers violate any rules that affect your ability to live in your new home, you have protection.
Anytime you’re financing a large purchase, like a condo, the more you can protect your assets, the safer you are. Lenders know this, and they put the onus on the buyer to carry the lender’s title insurance. But you can protect yourself with an inexpensive addition to your financial portfolio with owner’s title insurance.