Trust Escrow: Why Title Insurance Matters

by Carson BuckFebruary 8, 2017

What Every Homebuyer Should Know About Escrow

Title insurance, as a concept, is not nearly as well understood by most prospective homebuyers and current homeowners as the other types of insurance that protect them. That doesn’t make it any less important, however. Title insurance allows the homeowner the ability to relax, regarding several dangers that they may not even realize they are exposed to without it.

We’ll get into what those dangers are in a moment, but rest assured you pay for title insurance for not just one, but many good reasons. According to an article on the NuWire Investor website, as many as 26% of all properties in the United States have some sort of title issue.

What many homeowners struggle to understand is that when you purchase a piece of property, or a home built on a piece of property, what you’re really buying is the title to that property, not the property itself. Titles, like any other legal document, can have inherent issues and title insurance protects you against any issues regarding your title for a one-time payment.

This, according to the handy “Your Guide to the Real Estate Transaction” published by Stewart, differentiates title insurance, because it’s not something you purchase in anticipation of future problems, but instead, to insure the history of your title and that it grants you what it says it does in regards to your property.
title insurance and escrow

Two Types of Title Insurance

There are two types of title insurance. One is required by lenders when a home is purchased on credit, and another is available to homeowners who own the title to their property outright.
Lenders require buyers purchasing title to properties with credit to carry title insurance in order to protect their interest in the property while the homeowner is paying off their loan. Title insurance for homeowners in possession of their title is still recommended, however, as problems with title to property are not limited to properties purchased with credit and may not come into focus until a property is being sold to the next buyer.
title insurance and escrow

Title Insurance Protections

According to a handy list published on the American Family Insurance website, there are at least twenty problems that can affect those 26% of properties that suffer from title issues. These can include everything from forgery of deeds and other legal documents associated with the property, to the signing of deeds challenged due to mental incapacity, illness, imprisonment, unfinalized divorces, and many other problems stemming from the nature of the property to the actions or inaction of prior owners.
title insurance and escrow

Title Insurance: The Most Important Component of Escrow?

Many real estate experts will tell you that title insurance is, hands down, the most important aspect or component of the escrow process. Whether you are purchasing title insurance because your lender requires it, or are considering its purchase to protect your title to property owned outright, do not ignore its importance, and everything it can protect you from.


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About The Author
Carson Buck
Carson is a real estate agent based out of Phoenix, Arizona. Carson loves data and market research, and how readily available it is in today's world. He is passionate about interpreting these insights to help his clients find and buy their perfect home. Carson got into the real estate industry because he loves the feeling of handing over the keys to a new home to happy clients. In his free time, he works on his backyard bonsai garden and spends time with his wife, Julia.

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