Title Search and Insurance Reduce Risk If you finance a real estate purchase with debt, your lender generally will require you to buy title insurance. But title insurance is a good idea even if you don’t borrow, even if you know the seller well and even though title searches don’t necessarily reveal all defects. Qualifying for Coverage The title company that provides insurance coverage will research a title’s history before it sells you a policy. It will investigate the: o Title’s marketability, o Chronological ownership chain, o Existence of liens, mortgages, overdue special assessments or other claims, o Property-related court decisions, o Possible defects in previous ownership transfers, o Existence of missing heirs, or o Restrictions or encumbrances that lessen title value. The title examiner prepares a report called an abstract. Review this before closing the deal. If it reveals defects or conflicts, resolve them before the title company approves your application. Protecting Yourself After the title company is satisfied that the title is clear, it will issue an insurance policy covering you against losses caused if: o The title turns out to be fraudulent, defective or invalid, o Ownership disputes arise, or o The title company’s search was negligent. In most cases, the coverage extends to your heirs and continues (to some extent) even if the title company goes out of business. If you eventually find a title defect and go ahead with a real estate buy, you’ll be taking a big risk. In some cases, a title company may insure the risk if you provide appropriate affidavits and place money in escrow to cover the risk. Getting Help Whether you buy title insurance or not, your attorney can help you minimize the risks of investing in commercial property. Contact | Legal Disclaimer