Monday, December 13, 2010

Reason #46 as to Why It's Important to Purchase Title Insurance

When purchasing a home in Georgia, it is standard that the title be conveyed by a general warranty deed. In fact, the standard Georgia contract reads under paragraph 8 regarding Title:

"A. Warranty: Seller warrants that at the closing Seller will convey good and marketable title to said Property by general warranty deed ......"

But when it comes to purchasing a foreclosure/bank-owned property, the seller typically only provides a special (or limited) warranty deed. They will normally either make the change on the Georgia contract or have the buyer sign off on their bank addendum that advises of the change in the type of deed. Before you sign off on it, make sure you know the difference:

Under a General Warranty Deed, the seller warrants title to the property since the dawn of time. If there is a defect, regardless of the cause, the buyer has the option of proceeding after the seller for any resulting damage. Under a Limited or Special Warranty Deed, the seller is only warranting the title during the period of their ownership. They do not warrant anything that may have happened in the backchain of the title.

This may panic you at first, but this is where the importance of title insurance comes in. If a blemish on the title came up after closing and it was something that was prior to the bank's ownership of the property, then you would be S.O.L. (pardon my french, but it's the best way to put it!); however, IF you purchased title insurance, then you could file a claim under the policy. See why it's important to purchase title insurance? I always tell my buyers that title insurance isn't like when you purchase an electronic at Best Buy and they offer you the extended warranty for an additional fee - I think most of us turn that offer down. This is SO much more important than an extended warranty! You may think that title issues are rare, but come sit down with me and I'll share some of the horror stories with you.

Title insurance is a one time premium that is paid at closing (factored into your closing costs) and it protects you for as long as you or your heirs own the property. The cost varies based on the value of the property, but it's not a large expense and is so incredibly worth it. Depending on the policy, it can cover things like: sudden appearance of unknown heirs claiming interest in the property, forged deeds or impersonations, incorrect legal descriptions, improper recording of deeds, etc.

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