Title Insurance When Buying Land

Do i need to get title insurance when buying land only property?And what is title insurance for anyway?

1 Answer

If you are financing the land purchase, the lender will require you to get a title insurance policy; if you are paying cash, this decision is up to you, however I highly recommend it.

Title insurance insures the history of the property. By getting a title insurance policy you are protecting yourself from any past claims someone else may have on the land. If for instance you bought a title insurance policy and a year later a survey team discovers that part of the land you bought actually belongs to the State; with an active title insurance policy, you would be refunded part of the purchase price equivalent to the cost of the land sold to you that belongs to the State. Without a title insurance policy, the State would simply retake control of the land, and you would be out of luck and that part of your investment would be lost. This is one example of how title insurance protects you - there are many other pratical applications.

Moreover there are different types of title insurance policies offering different coverage. The three basic forms of coverage are: Owners, Lenders and Extended.

Owners title insurance covers: clear title to the property, incorrect signatures on documents, fraud and forgery, encumbrances or judgments, defective recordation, restrictive covenants.

Lenders title insurance covers: mechanics and other nonrecorded liens, unrecorded easements and access rights, other unrecorded defects or documents.

Extended title insurance covers: building permit violations from previous owners, subdivision maps, covenant violation from past owners, strucutre dmamage from mineral extraction, living trusts, a variety of encroachments, and forgeries after title insurance is issued.

In addition you can get binders which are an additional charge and allow for discounted title work for future affairs at dsciounted rates; something that should be considered if you will be moving and selling in a short period of time.

You should know that a title insurance policy is good forever as long as you remain the owner of the property. This is a one time fee paid at closing, and well worht the money.