When you buy a new home, you also need to purchase title insurance. This type of insurance protects your purchase by finding and remedying issues that can affect your right to ownership.
In 2020, according to the National Association of REALTORS®, property owners sold 5.64 million homes in the U.S. Title companies looked into public records on these properties to determine their ownership status and the insurability of these property titles.
What title insurance does
When you finance a property during a home sale, a record of this transaction gets filed in the official public archives. Other events that can affect property ownership also get filed in these archives, and they include issues like levies and liens.
Your title company will research these records to identify any ownership issues and the status of the property. If the title comes back clear, the underwriter can then effectively insure the title and protect your right to the property.
Why you need this insurance
Even if you feel confident in the skills of the title professional you choose, you may still not find all the problems associated with the property. Some issues, like filing errors, undisclosed heirs and forgeries can be difficult to find.
Title insurance ensures that after your title company does a full search into the property, you still have protection from other issues that could arise later on. If you plan to finance any portion of your purchase, your lender may require that you obtain some form of title insurance to protect their interests and yours.