When residents of Pennsylvania purchase a home or other type of real estate, they will receive at closing an itemized statement of their closing costs. This statement will itemize expenses such as the realtor’s commission, unpaid real property taxes, expenses of any survey, conveyancing taxes such as a deed tax or mortgage registry tax and in virtually every case an item called “title insurance.” Many Pennsylvanians wonder what is title insurance and which party does it help?
What is title insurance?
Title insurance is intended to protect the buyer and the lender against any unknown defects in the seller’s title. Real property is, of course, nothing more than a patch of ground. Its boundaries have most likely been carefully measured by a surveyor and have been recorded with the title records office. Nevertheless, any given parcel of real estate may have been bought, sold or mortgaged many times before the newest conveyance is negotiated.
In the course of these transactions, many entries may have been made in the county land records. For example, previous owners may have borrowed money to buy the land and given a lender a mortgage to secure repayment of the loan. When a loan is repaid, the lender is required to execute and record a satisfaction of the mortgage and a release of the mortgage lien. But what happens if a lender fails to issue a satisfaction or enters erroneous data such as the legal description of the property or the name and address of the borrowers. Title insurance will provide financial reimbursement to the party insured by the policy for any such defect.
What to keep in mind
In most residential real estate transactions, the buy is required to purchase a policy of title insurance that affords coverage for the lender (a mortgagee’s policy). Coverage for any losses suffered by the owner will only be provided if the buyer purchases a buyer’s policy. Anyone with questions about title insurance may wish to consult an experienced real estate attorney for advice about the coverage that is provided and whether an owner’s policy is necessary.
