So, you understand what a hard money loan is, and you’ve got your basic lending terms down. You understand the difference between points and rates and why each of them is important.
You’re this far into the loan process, but something new has come up. Title insurance. But what does that even mean? What does it do for you and why is it important?
Title insurance is actually very important and not something a lot of people understand. It’s a critical step in any real estate transaction, even if you’re paying cash and not going through a lender. We always recommend using title insurance to avoid a large financial risk.
So, what exactly is title insurance?
First, let’s talk about what a title is. This is simply a legal term ensuring ownership of a property, typically proven in the form of a deed. A deed is a legal document that transfers title from one person to another.
When you buy property from another person, the title, and therefore ownership, transfers from them to you.
Title insurance provides protection against loss if a defect is found within your title.
This includes:
- Errors
- Liens
- Claims of ownership
- Fraud
- Invalid documents
- And more
It protects buyers and lenders against problems with a title when transferring property ownership.
What this basically means is that this insurance protects you in case something goes wrong with the title of the property you’re buying.
It’s the job of the title company to make sure the person selling the property is who they say they are and that they have the legal right to sell said property.
Title insurers thoroughly research the records for the property you are buying to make sure there aren’t any liens, unpaid taxes, fraud, undisclosed heirs, etc.
Here at Loan Ranger Capital, we require title insurance to protect all parties involved. Even if you decide to close on a property without using a lender, we highly recommend always using a title insurance company.
If you have any questions just let us know, we’re happy to help!