Terms to Know When You’re Dealing with Real Estate - Part 3

Every professional sector has its distinct terminology which the average layman doesn’t understand. Over the next year, my monthly blog will present real estate words in layman’s terms that even the most ‘average bear’ can understand and use to their real estate adventures.

This month’s terms are Title and Title Insurance

What is a Title

"Title" is a synonym for “ownership". When you purchase a home, you receive a title just like a car. You own a new car and you own your new home. It is evidence that you own your home. It may be conveyed by deed, a gift, purchase, or other procedures.

What is Title Insurance

When you buy any real property, a home, or a vacant piece of land, it’s imperative you purchase “owners title insurance policy”. (Real is a term used to describe real estate – not a car, equipment, furnishings). It protects the owner or insured against loss occurring through title defects. Just like any other insurance, title insurance transfers the risk of loss to the insurance company. The cost is based on the purchase price. 

Your lending company may also require the buyer to purchase title insurance to cover the amount of the loan.  This is known as a “mortgagee’s policy” and the lender is the beneficiary. The cost is based on the amount of the loan.

Examples:

A man puts a for sale sign in a lot that he doesn’t own while the owner is unaware of his lot being up for sale. In the meantime, he puts his name on the deed. If a buyer purchases the lot and the transaction goes through successfully, the owner’s title insurance will pay the owner for his loss. 

A family owns a house and the owners purchase an owner policy. It is discovered there is a stream of water running underground beneath the house. Since this is irreparable, the house was condemned. The lender received its investment in the property and the owner’s received the balance between the purchase price and the outstanding loan.

Call me today for more info on real estate and the terms used.