When you are preparing for the purchase of your home, your mortgage lender may require you to purchase title insurance. The reason lenders ask borrowers to purchase these policies is because they do not want any legal and financial claims on the property that become known after the sale is finalized.
Although you might not think that you need title insurance for your condo, purchasing a condo is just as much as a financial commitment as purchasing a home, and you need to take steps to protect yourself. While mortgage lenders will ask you to purchase lender’s policy to protect their financial interests, it can also be a good idea to get an owner’s title insurance policy, as well.
In a condominium, you technically do not own “land” but rather you own the “air space” inside the walls, ceiling and floor of your unit. Title insurance is available for a condominium, just as it is in a house on its own parcel of land. You should get title insurance on your condominium unit to protect your interests.
While a clear or “clean” title (one without any encumbrances, liens or other title defects on it) is necessary in order to purchase a property, sometimes things can slip through the cracks and cause issues. Title insurance exists to make sure you are covered if that happens.
A title search will be done when you are purchasing your condominium, just as it is when buying a house, and this search will reveal any defects in the title of the unit along with any problems or liens which may occur against the condominium building or the complex itself. You will receive a deed to your own unit plus an undivided interest in the common areas, such as the parking areas, walkways, yards, and pool.
Read over the title report carefully. You would want to be sure that you could not be held liable for any unpaid bills or liens against the condominium association.
If a lender is involved in your purchase, they will require title insurance to protect their interest in the condominium unit. Often special condominium “endorsements” are required which will be attached to the title insurance policy.
Cost of title insurance is relatively inexpensive and worth it in comparison to the potential losses you and your lender could face.
Common problems that title companies look for:
· Forged property titles
· Liens on the home due to:
· Homeowner owing back taxes to federal, state, or local governments
· Unpaid home equity lines of credit
· Unpaid bills from contractors
· Estate/inheritance issues
· Wills that are unclear or inconsistent,
· Multiple documents in a will that conflict with one another
· Previously unknown heirs to an estate making an ownership claim
· Easements on the property that weren’t properly documented and require you to modify or remove parts or all of the home
· Filing mistakes/human error
Title insurance is particularly important for condos because it covers construction liens and failure to disclose information on the status certificate that would result in a special assessment or increase in common expenses. It also offers standard owner’s coverage like:
If a previous owner renovated without getting the required permits and the municipality or the condominium corporation is forcing you, the new owner, to fix it.
In case the taxes and utilities of the previous owners are not up to date.
In case someone impersonates you to get a mortgage on your property or to sell your house without your knowledge.
In case there were unknown outstanding work orders before the date of the policy.
If something goes wrong with the title or the ownership comes into question after you have purchased the condo, a title insurance policy will cover any related legal costs to retain ownership. In some cases, you may also inherit any previously undiscovered liens against the
property. Title insurance policy will allow you to pay off those unpredictable bills, which can make your owner’s title insurance policy worth it.
Title insurance policies will range in price, between $500 to $3,500, depending on the value of the property, the provider, the location, and the coverage limits.
As legal proceedings over ownership and liens on the condominium can be extremely costly, these one-time fees will be something you are happy to have paid if these issues do arise on your new property.
There are several title insurance providers; you should compare their policies before buying from one. Make sure your title insurance policy protects you from all kind of title defects and risks mentioned in this article.
Assistant Manager, Real EstateTreadstone Associates