People invest large amounts of money in their homes and other real estate investments. Provided that they pay their mortgages and their taxes, they should have control over the property indefinitely. They can sell it later if they so wish or bequeath it to loved ones in an estate plan.
Unfortunately, some property owners learn after investing for years in a home that another party may have an interest in the home. They may face a title claim brought by an heir or a spouse of a prior owner. They may then face litigation in court that could strip them of their ownership rights and deprive them of the equity that they accumulated in the property during their ownership.
Title insurance is a common requirement imposed by mortgage companies when people buy homes. Even those paying cash may choose to purchase title insurance policies to protect themselves from this exact scenario.
What forms of support does title insurance provide in a title dispute situation?
Coverage for legal representation
Title disputes can take months to resolve. They typically require litigation in court unless there is clear evidence supporting the current owner. Homeowners typically need to retain the services of a lawyer familiar with real estate law and title claims to protect their property.
When people have title insurance coverage, their policies can help cover those costs. Homeowners can respond assertively without worrying about the potential expense involved in doing so. Given how many people have limited personal savings, the ability to rely on coverage for legal fees can be an important form of support for the property owner.
Coverage for lost equity
Sometimes, despite the best efforts of the property owner and their attorney, the party making the title claim prevails in court. In that situation, the claimant likely assumes ownership and possession of the property, leaving the prior order in need of housing and at risk of losing what they have invested in the home.
Title insurance can reimburse owners for their down payment and accrued equity in the event of a successful title claim. The funds that the property owners receive after losing a title dispute can help them acquire a new home.
Those facing title disputes may need help preparing to respond, and that’s okay. Making use of title insurance can be beneficial for those at risk of losing their ownership interest in real property due to a title claim made by an outside party.
