You do not want any unexpected surprises when you buy a new home or commercial property. That is why conducting due diligence on a real estate title can be of benefit. Background research might give the property a clean bill of health so you can buy it and use it as you wish. But some home buyers still find title problems after a sale.
If unforeseen title defects arise, you need protection so that you do not have to spend a lot of money correcting the issue. This is why some people buy a title insurance policy.
Examples of title defects
Bankrate explains that different problems can come up with a real estate title even after a sale. You might discover that the property has a lien on it from a contractor who performed work on the house but did not receive payment. Some properties have liens because the previous owner failed to pay property taxes or child support.
Sometimes fraud or family disputes can surface during a real estate purchase. You might learn that the deed used by the previous owner is a forgery. This could invite questions about who the real owner is. In some instances, an unknown heir to the property emerges. There can also be encroachments or restrictions on the property that come to light.
How title insurance works
Discovering a title defect after buying a piece of property can put you on the hook for resolving it. Some title defects will take a lot of money to resolve. They may even involve you in court litigation. But if you have a title insurance policy from a title company, you may have protection when you need it.
A title company conducts a background check of a title and issues a title insurance policy to the property buyer. In the event you learn of a title defect, your policy will pay the legal damages that you incur. Keep in mind that the exact defects covered will depend on the policy you receive. This will be an important topic to consider if you seek out title insurance to help you move forward with your real estate purchase.
