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Do I really need to purchase title insurance for my home?

First-time homebuyers soon realize that purchasing a home is even more expensive than they expected. There are fees for home inspections, termite inspections, appraisals, surveys, administrative expenses and title insurance – just to name a few.

As such, it’s only natural to want to try to shave a few dollars off of the bottom line. But doing so may at best be shortsighted, and at worst, could turn the purchase of your “dream home” into a nightmare.

Why you should never neglect to buy title insurance

Title insurance protects you – the buyer – in the event that something that occurred in the past with a former owner becomes a roadblock to your having free and clear title to your property. Confused? Consider the following hypothetical scenario:

Let’s say you and your spouse are buying a property with your savings combined with the bulk of an inheritance from a deceased parent. Because you worked your way through college for a local real estate attorney, spending your days in dusty courthouse basements running abstracts for properties, you decide to do your own title search on your soon-to-be-purchased home.

You feel fairly secure that nothing will be amiss. After all, the elderly homeowners who are downsizing were the sole owner-occupiers of the property for the last 40 years. Your day at the Passaic County Courthouse turns up no red flags, so you decide to forego the protections title insurance offers. After all, one of the reasons you’re paying cash is to cut back on costs, right?

Being penny wise and pound foolish

Wrong. Your day of research at the courthouse failed to reveal that the state of New York had levied a lien against the property 20 years ago for some allegedly unpaid income taxes on the part of the sellers. As you will soon find out, you have invested all of your money into a property to which there is no clear title. Welcome to your white elephant.

A good title insurance policy with an errors and omissions rider would have protected you in this instance. As it stands now, to get clear title on your home and property, you will have to invest significant funds in attorney’s fees in order to correct this egregious error. Before it’s over, you may even have to walk away from your home with nothing but bitter hindsight as compensation.

Protect your investment

There may still be ways to reduce some of the extraneous costs associated with buying property, but that should never be your overriding concern. Instead, focus on directing your resources to protect this vital investment, both now and in the future.



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