When it comes to closing on a house in Austin, amidst all the paperwork, you might ask, “Do I need Title Insurance?” What does the Texas Department of Insurance say?
What is Title Insurance?
Title insurance insures against financial loss caused by defects in title to real estate. Title insurance companies defend against lawsuits attacking the title or, in the case of a covered loss, reimburse the insured up to the policy limit.
What Kinds of Defects Does Title Insurance Protect you from?
It protects you against loss due to title defects, liens, or other similar matters. Title insurance protects you from claims of ownership by other parties. It protects you against losses from problems that arose before you bought the property. The title company will defend you in court if there is a claim against your property and will pay for covered losses.
Is it Required?
Texas does not require title insurance. The lender will require you to buy a Loan Policy of Title Insurance to protect their interest.
Do I Need Title Insurance?
Suppose, as INMAN points out in this article, “You receive a late notice in the mail for a loan you do not have. This notice says you have an equity line of credit, but you don’t.
Upon further investigation, you realize someone has stolen your identity and taken out a loan in your name. That loan has been recorded against your property, and now it’s in default. You are about to be foreclosed by the lender. Without coverage, you will need to hire an expensive real estate lawyer.
With Title Insurance, your monetary stake in your home is protected should someone else make a claim of ownership to your property after closing. What is the cost of Title Insurance? The average cost of owner’s or lender’s title insurance is about $2,000 or 0.05% of the purchase price of your home.
Title insurance protects real estate purchasers and/or lenders from losses that arise after a real estate settlement but result from unknown liens, encumbrances, or other defects upon the title that existed before settlement. Examples of title defects include outstanding property taxes not paid by a previous owner, fraud or forgery of a prior deed or transfer, or a spouse or unknown heir who steps forward to make a claim against the title.
Do I Need Title Insurance?
Although an owner’s title policy has always been an optional purchase for a buyer, it’s highly recommended, as it is a one-time fee that protects the homeowner and their heirs for life — even after they no longer own the property.
Federal law grants homebuyers the right to choose their title service provider. Many homebuyers don’t realize they have a choice. They just go with whatever company their real estate agent recommends. The Consumer Financial Protection Bureau has been cracking down lately on the cozy relationship some agents have with title companies.
Many state real estate commissions are adding language to their laws to discourage licensees from steering their homebuyers toward specific lenders or title companies. The practice now outlawed is thought to restrict the homebuyer’s choices and inflate costs. You, as a consumer, want to know that the service providers are the best and that your broker has no conflicts of interest.