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Cloudy Days, Cloudy Titles And The Stormy Weather They Bring

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Title Insurance BasicsWhat Could Possible Go Wrong In Real Estate?

There is an unspoken fear in the back of the mind of every owner, seller and buyer of real estate in the U.S.A. That fear is best expressed as the good old question that catches all risks and has too often been the famous last words of those who undertook dangerous endeavors too lightly: What could possibly go wrong?

Defects In The Title

There is one specific thing of which buyers particularly need to beware: The possibility that some previously unknown party could come forward with a legitimate legal claim to the property that you have purchased, who takes control of your interest, either the whole or in part. That would be very upsetting to say the least.

Real estate, meaning land and the improvements on it, always has a history. Title to a property can have conflicting and minor claims that have been forgotten for any number of reasons and that interest may only come to light years later. It might even happen at the most inconvenient time, such as just after you have taken possession of the property by paying your hard earned savings and taking on huge financial debt.

Professionals On The Lookout

Fortunately the real estate industry is configured to make this as remote an outcome as possible. Selling a home includes title search as a normal part of the process, title search is designed specifically to catch any possible conflicts or a cloud on the title before you close on the sale and to convey the asset free of liens and encumbrances.

Now, there is always the very remote risk that the cloud on the title will not be found. A title search really just reduces this risk to the absolute minimum. To prevent a costly court battle that results from any defect to the title it is standard for the buyer to purchase title insurance to protect himself or herself.

Two Types Of Title Insurance

There are two forms of title insurance. The first is an owner’s policy, which is largely self-explanatory: It assures you retain the wealth behind your interest in the property. The second is a lender’s policy: It protects the interest of any lender, assuming you had to raise finance to buy the property.

If a claim to title is discovered during the search the remedy is to obtain a quitclaim deed, which may require a legal action. When the cloud comes to light after certification by the title company, your title insurance policy will cover the cost of the legal actions to clear the title.

Clouds Are Rare But Expected Occasionally

There is always the possibility that some sort of defect of the title to real estate can arise. Fortunately, the real estate industry has learned over the decades how to prepare for such contingencies and to insure against them.

As long as you follow the standard guidelines, perform the required searches and secure the policies that protect you a cloud on your title will be unlikely or be dealt to ensure that you have everything that you need to enjoy your new home.

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Trace Richardson has written 638 articles on BankChirp.com

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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