People preparing for a real estate transaction need to go over their paperwork carefully. Frequently, buyers don’t spend much time reviewing deeds or mortgage notes prior to signing them. However, they may look over the details included on their final financial settlement statement very closely.
The final settlement statement provided with the closing paperwork tells a buyer how much cash or secured funds they have to bring to the closing table and also clarifies all of their closing costs. When buyers spot issues, they can address them ahead of time so that the closing can proceed as intended after the correction of the documents.
Buyers may discover that there are two title insurance premiums listed on their settlement statements. Contrary to what people might assume, there’s a very simple explanation for why they have to pay two separate title insurance premiums.
Buyers and lenders both need protection
Title insurance protects the investment made when acquiring real property. It essentially protects the right to title, which is what establishes ownership of real property. Mortgage lenders typically require that buyers pay for a lender’s policy. If a title dispute arises in the future, the mortgage company can rely on its policy to reimburse the company for any outstanding principal balance due on the mortgage.
Buyers typically also want to insure their title rights. A buyer’s policy can cover the cost of legal representation during a title dispute. It can also reimburse the buyer for the funds they invested in the property if they lose a title dispute that goes to trial. In scenarios where an outside party does have a valid claim to title, title insurance can reimburse buyers for the amount they transferred for their down payment and any equity that they accrued in the property through regular payments.
Although most people never need their title insurance coverage, the few people who do are generally very grateful to have it. Buyers purchasing financed properties have the option of waiving their own coverage but generally have to purchase a policy to protect their lender. Those completing cash purchases can choose whether or not to invest in title coverage.
They may want to discuss their situation with someone familiar with title disputes before making a decision that could have major consequences later. Reviewing a settlement statement and other aspects of a real estate transaction in depth with a skilled legal team can help buyers protect themselves during what could be the biggest purchase of their lives.