Nadel & Ciarlo, P.C.

The importance of title insurance in a residential property sale


If you are purchasing residential real estate in New York, you want to be sure the property is free of unknown title issues. In real estate, title basically means ownership. It can also be defined as evidence of that ownership. Title can be held by an individual, corporation, co-operative or other legal entity. It can be held jointly or in common with others.

Even when you are dealing with the person who holds themselves out as owner of the property, other parties may have interests in the property. If there is a mortgage on the property, the bank has an interest in the property. If there is a lien on the property for unpaid taxes, the government entity holding the lien has an interest in the property. If a previous owner granted a neighbor an easement to drive across the property, that neighbor has a legal interest in the property. A previous owner may have given another party mineral or air rights in the property. The seller may be unaware of these other interests or may fail to disclose them.

Title problems can arise for other reasons. These range from incorrectly recorded documents to fraudulent transactions by previous owners. Title can also be affected by probate or divorce proceedings in the past.

A title insurance policy insures against unforeseen title issues arising based on past events. If an issue does arise, the title insurer will pay to have it corrected. If a third party claims an interest in the property, the insurer will pay the legal costs necessary to defend against their claim.

When you purchase property your lender will have a title search conducted to identify any potential problems. They will also typically require you to purchase a lender's title insurance policy. This policy will protect the lender up to the outstanding amount of their mortgage loan. As a purchaser, it is a good idea to buy an owner's policy that will protect your equity in the property.

Source: Findlaw.com, "Do You Need Title Insurance?" accessed Jan. 26, 2015

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