What You Need to Know about Title Insurance when Buying Home in Arizona?
During the process of buying a home in Arizona, you most probably heard about “title insurance” when making offer and during escrow. What is title insurance? Why title insurance is important in real estate transaction? Here are what you need to know about title insurance
What is “title”?
As it relates to real estate terms, “title” refers to the ownership rights to a certain piece of property.
What is title insurance?
Title insurance is an insurance policy that protects property owners (buyer) and their lenders against losses related to the property’s title or ownership. Title insurance minimizes the risk of acquiring property whose legal history is unknown to the purchaser.
Title insurance is issued for a one-time fee, called a premium, usually due at the time of closing or settlement in real estate transaction, and is based on the price of the property. Title insurance coverage lasts as long as the insured or their heirs hold title to the property.
What are the different types of title insurance?
There are two types of title insurance:
An owner’s title insurance policy guarantees that the buyer has the right to the property. It usually covers the cost of any legal fees that may arise when defending a claim, up the amount of the policy.
Another is lender’s title insurance policy, if you buying a house with mortgage. lender’s title insurance policy protects a bank or other lending institution issuing a mortgage from losses resulting from disputes over property ownership. This policy covers the amount of the loan, and the premium is calculated based on that amount. Most lenders require this coverage. Unlike an owner’s policy, this coverage ends when the mortgage is paid.
An Owner’s Title Insurance Policy is your best protection against potential defects that can remain hidden despite the most thorough search of public records. A Lender’s Title Insurance Policy also exists to protect your lender’s interest.
How title insurance can protect a buyer?
Here are examples of the many risks against which title insurance can protect a buyer are:
- Forged documents
- Fraud
- Confusion from similarity of names
- Liens existing against the property at the time the policy was issued
- Clerical errors in public records
- Inaccurate or conflicting wills and trusts related to the title
Who Is paying for title insurance?
According to Arizona Residential Purchase Contract, section 3c:
“Buyer shall be provided at Seller’s expenses an American Land Title Association (“ALTA”) Homeowner’s Title Insurance Policy, or if not available, an ALTA Residential Title Insurance Policy, or if not available, a Standard Owner’s Title Insurance, showing title vested in Buyer. Buyer may acquire extended coverage at Buyer’s own additional expenses. If applicable, Buyer shall pay the cost of obtaining the ALTA Lender Title Insurance Policy”
In short, when you are buying a home in Arizona, the seller will pay the buyer’s owner title insurance policy. However, it is buyer responsibility to pay the cost of obtaining Lender Title Insurance Policy.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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