What is Title Insurance?
Why must I purchase this?
The title search is the process in which a title company combs through the public record for any defects or encumbrances during the chain of title over the years that would put the lender at financial risk, put the borrower at financial risk, and/or provide evidence against the seller’s legal right to sell the property. The lender will not provide funds to complete the purchase of the property without a loan title insurance policy, and the policy will not be issued without a comprehensive title search.
The search may reveal such problems as a disputable chain of ownership, unpaid state or property taxes by previous owners, an undisclosed claim from an heir of a former owner, an easement to the power company to install a power line on your property, and mechanics/contractors liens. If any of these appear in the title search, they must be resolved before the title to the property can be transferred and before any loan can be finalized.
In addition to title loss coverage under a lender or owner policy, a title insurer must also pay for any and all costs associated with defense against title challenges and, if unsuccessful, the title insurer must also pay for any reduction in land value as result.
You pay for an owner’s policy only once, at the close of escrow; there are no continuing monthly premiums.
In Arizona, typically the seller pays for the standard owner’s coverage as part of the closing costs. It is the Seller’s responsibility to provide a clear title to the property being transferred, and to provide title insurance to assure the Buyer that any undiscovered defects in the title will not impact the Buyer’s rights to possess, use and enjoy the property.