10 Reasons Every Louisville Homeowner Needs Title Insurance
What is title insurance?
Title insurance is different from home insurance. Title insurance covers third-party property claims that don’t show up until after you’ve closed on your house. It doesn’t cover things like fire, flood or storm damage. Instead, it takes care of things like unpaid property taxes, code violations and fines. Without title insurance you could end up in a long expensive legal journey.
Title claims can happen anytime. Even if you’ve owned the property for years with no issues.
There are three main types of title defects:
Liens can be placed on the property by a contractor, tax authority or lender who hasn’t been paid. If someone tries to collect on their lien, you could get stuck paying someone else’s bills.
Easements are someone else’s right to use your property. For example, if you have utility lines in your backyard, the local utility company can access your property anytime they want to work on the lines. This may seem like only a minor annoyance but it can restrict your ability to use your property how you want. You can’t plant a big beautiful vegetable garden if it will restrict the power company’s ability to drive their vehicles to the power line.
Encumbrances include things like violations of zoning laws, HOAS, or leaseholder rights.
Your mortgage lender will conduct a title search to uncover any of these issues before your closing day but these issues don’t always show up during the search. The sellers may not even know about them but their paydays can be collected anytime.
Is title insurance required?
Title insurance is almost always required for lenders but an owner’s policy is optional. We strongly recommend it because your home is likely your largest asset. Title insurance is a good way to ensure it stays that way.
10 reasons every Louisville homeowner needs title insurance
Title insurance will grant you peace of mind. It will also protect you from these issues:
It will protect you from code violations
If any renovations have been made to the home throughout its lifespan, it’s paramount that they are up to date with current code regulations. The Louisville residential code book is 55 pages of dense material. Instead of pouring over these pages to make sure your house is perfectly compliant, you can buy title insurance to protect yourself.
It will protect you from lawsuits
If the seller doesn’t legally have the right to sell the home you could wind up in a messy situation. The most common example is if a home is sold mid-divorce before the couple has worked out the division of assets.
It will protect you against honest mistakes
There is a lot of paperwork involved in building, buying and selling homes. With so many people contributing to the paperwork over the years it’s only natural that occasional clerical mistakes will happen. We’re only human after all! Title insurance will protect you from this high margin of error.
It will protect you from fraud or forgery
This one speaks for itself. Fraud is a serious issue. If fraud or forgery has ever been part of the house history your title insurance will protect you from any liability.
It will protect you from undisclosed easements
If someone owns an easement on your property it must be disclosed before the sale of the house. If not, that’s an issue. Your title insurance will help substantiate your rights as a homeowner.
It will protect you from conflicting wills
If your home has been left to someone in a will things can get messy. The person selling you your home may not even have the right to do so. Title insurance will keep you out of this mess.
It will protect you from boundary disputes
Land surveys can be tricky. Especially if you’re buying a home with acreage. If the land has been kept in the family for generations it’s not uncommon for surveys from the 1800s to say things like “the property boundary is just beyond the tall pile of rocks”. Title insurance protects you from any land survey or boundary disputes. The land that was outlined during the purchase is what you legally own.
It will protect you from contractor liens
If a contractor goes unpaid they can take out a lien on the house. If you don’t buy title insurance you could wind up responsible for someone else’s unpaid bills.
It will protect you from unpaid child support
If the previous owner has defaulted on child support the court will begin to seize assets to cover the missed payments. The seller may attempt to sell off their assets before the courts can take them. Title insurance protects you from winding up in the middle of this mess.
It will protect you from encroachments
If a neighbor builds a fence and it extends onto your land this is an encroachment. Your title insurance will help protect your right to fight against this if you wish.
How much does title insurance cost?
Good news! Title insurance is a one-time fee. It won’t be a recurring monthly cost.
Title insurance is part of your “closing costs” package. In Louisville in 2022, average closing costs are 3.42% of the home’s final sale price. Title insurance makes up about 0.5%-1% of the home’s purchase price.
For example, if you’re purchasing a home that costs $300,000:
$300,000 x .0342 = $10,260 closing costs
$300,000 x .005= $1,500 title insurance
Closing costs are usually paid by the buyer but not always. This is something that can be negotiated by your real estate agent.
Like with any other type of insurance, you buy title insurance hoping you’ll never need it. Ultimately, it’s a small price to pay for protection from serious issues.