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What is Title Insurance & Why is it Important?

Updated: Mar 26, 2021

Title Insurance is a type of insurance that protects real estate lenders and buyers from financial loss sustained from defects in title to a property. Generally, there are two types of Title Insurance including: (1) a lenders policy and (2) owners policy.

Most common in real estate transactions is a lenders policy which is purchased by the borrower and protects the lender from any defects in title to the property. The lenders policy is generally covered in a 'Title Commitment' report where the lender will promise to issue title insurance for the property after closing so long as the terms, conditions, and exclusions are met - those items usually covered in the insurance policy itself.

Types of Defects in Title. Common defects in Title include, but are not limited to:

  • Liens

  • Encumbrances

  • Defects in History/Legitimacy of Ownership

In addition to the defects listed above, common claims legally filed against title include, but are not limited to:

  • Back Taxes

  • Liens (e.g. Mechanic, Judgment Liens, Creditor Liens)

  • Conflicting Wills

  • Water Meter Bill

Believe it or not, New York City can bill four (4) years back of your outstanding water & sewage bill. That is why it is crucial to have a final water meter reading ordered and the appropriate funds set aside at closing to cover any outstanding balances.

Clean Title is Key. Make sure you work with your real estate attorney and brokers throughout your home-buying journey and address any and all title concerns prior to closing. Clean title is key to making sure the transaction goes through painless without any interruptions in your future.


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