Selling a home involves lots of details and logistics, many of which can be overwhelming for sellers. Besides the substantial tasks of getting a property ready for the market and finding a buyer, sellers also have to consider and address a number of closing-related issues that are essential to ensuring that everything goes smoothly and that the deal closes. One of those details, that many sellers have questions about, is title insurance.
What is Title Insurance?
Title insurance is exactly what it sounds like. It’s insurance to protect both buyers and lenders in the event that there are defects or problems with the title. Title insurance protects parties against property loss or damages resulting from liens, encumbrances, or title defects. Potential defects that title insurance protects against include someone coming forward claiming ownership, fraud, incorrect recording of documents, forgery, liens, encroachments, and easements. Notably, each policy is different and will outline the specific terms of what it protects against.
How Do You Get Title Insurance?
Title insurance is a standard part of closing, and lenders will require it. Obtaining title insurance is a two-step process. Step one is a title search, which is generally done by a title search company. This search is to ensure that the title is clear and free of claims. The objective of this search is to make sure, as much as possible, that there is nothing to cloud title, for example undisclosed heirs to the property, unpaid property taxes, liens from creditors, or pending actions involving the property.
Once it’s determined that title is clear – meaning that the seller owns it and is free to sell it – the second step is contracting with an underwriting company that will then issue the title insurance policy.
There are two types of title insurance – lender’s coverage and owner’s coverage. As you can guess, lender’s coverage protects the lender’s investment in a property, whereas owner’s insurance protects the buyer’s interest in the property. Lender’s insurance is generally required and owner’s insurance is optional but recommended.
Given that step one of this process involves a title search, buyers and sellers often ask why title insurance is even necessary. The reality is that mistakes can happen, records are not always complete, and old issues with title can arise at any point. Having a title insurance policy protects owners and lenders from property loss or damages resulting from title defects and pays for the defense of title if there are challenges to the title.
While they don’t necessarily happen often, title issues can arise at any point and can be expensive. As a result, title insurance is necessary to protect against unpredictable title defects or ownership challenges. It’s also worth noting that because each policy is different, with specific terms, conditions, and exclusions, it’s important to work with an experienced and trusted professional when purchasing title insurance.
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Does the Buyer or Seller Pay for Title Insurance?
Unlike most types of insurance, title insurance is a one-time, upfront cost. There are no monthly payments to lump into a mortgage, but instead, it’s a one-time fee that’s paid at closing.
In most states, buyers are required to pay for title insurance. In Alabama, however, it’s negotiable as to who will pay for it. Generally, the closing contract or loan application will state who is responsible. In the absence of such terms, it’s not uncommon for parties to fall back on market norms to determine who will pay for title insurance. It’s not uncommon in Alabama for the buyer and seller to split both the cost of title insurance and attorney closing fees. So, while there’s always an opportunity to negotiate this fee, it’s likely in Birmingham that the buyer and seller will split the fee.
Title insurance is just one of the many things that sellers have to keep in mind when selling their home, a process that’s often stressful and time-consuming. Thankfully, the good news is that there are ways to avoid the many logistics, details, and fees that are often associated with selling property. One such option is selling your home to an as-is cash buyer. Doing this is a quick and easy way to get your house sold, as these buyers are experienced with closings and can handle all aspects of the transaction.
To learn more about how to do this, contact Home Buyers Birmingham. You simply contact them and tell them about your property. If your home fits their buying criteria, they’ll schedule an appointment and then come up with a fair offer. If you accept that offer, they’ll work with a title company to close the deal and get the cash to you, generally within 7 days. When you work with Home Buyers Birmingham, you pay no fees, commissions, or closing costs. Instead, you let them handle all of the logistics and simply have cash presented to you.
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Home Buyers Birmingham
1821 11th Avenue South Suite #55331
Birmingham, Alabama 35205