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Call Us: Ben (231) 590-2198 | Mike (231) 645-1723
One of your closing costs as a seller will be a title insurance policy. Many sellers ask what title insurance is and why they are paying for it when it is to the benefit of the buyer.
According to the legal dictionary on Law.com, title insurance is:
"a policy issued by an insurance company guaranteeing that the title to a parcel of real property is clear and properly in the name of the title owner and that the owner has the right to deed the property (convey or sell) to another. Should a problem later arise with the title (such as an inaccurate description), the insurance company will pay damages to the new title holder or secured lender or take steps to correct the problem."
Upon the signing of a sales contract, we order title work through a title company. This company researches the title to the property and provides us with a commitment, on behalf of the insurance company, to provide a title insurance policy upon fulfillment of several requirements.
So why does the seller pay for the policy if it's for the buyer? This policy ensures that clear and marketable title is being passed to the new owner. No buyer wants to end up in a situation where another person stakes a claim in their new property; a title insurance policy guards against that.
When the buyer uses a lender for their financing, the bank is also issued a policy (at the buyer's expense) to guard the bank's investment in the property as well.
We hope this helps to shed some light on the mystery of title insurance. Tell us, what other questions do you have about closings? Comment below!
Marketing and Closing Director
Mike Street Team
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