Real estate buyers need to obtain title insurance


November 27, 2005

I am buying my first home. My Realtor is offering title examination insurance for $1,038.40. They say this will protect me if there are any liens or judgments on the property. Should I spend this money and hire a lawyer to review my purchase? Or should I do one or the other? The house is in the $180,000 to $190,000 range.

I recommend that you purchase owner's title insurance for your first home. Your lender will insist on title insurance to cover the amount of its loan. The additional cost for owner's title insurance should be approximately $225. The title insurance will cover you against unpaid liens and taxes as well as a claim by a third party to an ownership interest in the property. Although claims against title are infrequent, they can be costly. So, title insurance may offer valuable protection.

You have a right to select your own title company or attorney to represent you. You can call other title companies to obtain competitive quotes. You should make sure the title company includes all of its charges: title insurance, title examination, settlement fees and out-of-pocket expenses for a lien certificate and judgment reports. In addition to these title charges, you will pay state and county recordation and transfer taxes. These taxes should be detailed on the good-faith estimate provided by your lender or real estate agent.

Most homebuyers do not retain a lawyer to represent them at settlement because the loan documents are not subject to change or negotiation. However, if you are having any disputes with the sellers or feel the need for legal advice, then having your own lawyer at closing can be helpful.

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