Why Title Insurance Is Necessary in Texas

Texas Title Insurance

Buying property can be risky business. The Latin phrase caveat emptor, “Let the buyer beware” underscores the many perils for the buyer. Not only are you paying a large sum of money to own the property, but you run a risk that the property you think you own is not actually yours to own. In fact, for nearly the first century of our country’s existence, the buyer bore the burden of confirming that a land title was valid. Sadly, it was not uncommon for a buyer to lose a property as a result of an outstanding lien or other issue. In 1876 the first title insurance company was created to foster land development, bolster the American economy, and help protect buyers of real estate.

Why Use a Title Insurance Company?

Today a title insurance company still plays the important role of protecting buyers from loss if a title is somehow defective. A long list of complications may have existed before the buyer acquired the property: unpaid federal tax liens, mechanic’s liens, a family member or heir who claims ownership, fraudulent paperwork from a previous transaction, invalid divorces, new wills which affect inheritance of a property, confusion with similar names, or birth or adoption of a child after a will is made, to name a few. Fortunately, if there’s a question about the validity of the title, the title insurance company is responsible for investigating and settling the dispute.

Texas does not require title insurance for the buyer. A deed is the only required legal document for conveyance of property. However, even a personal friendship with a seller doesn’t guarantee that the title to the property is clear. Without title insurance, the buyer must sort out and settle any issues that arise.

How Does Title Insurance Differ from Homeowners Insurance?

Title insurance is not hazard or casualty insurance. It verifies that you actually own the property by making sure the title has no issues. By contrast, homeowner’s insurance offers protection if the property itself from damage, such as wind and fire. Another difference is that the buyer or seller pays the title insurance premium only once when closing on the property. Homeowner’s insurance premiums are paid annually.

Real estate transactions are major purchases for most people, and title insurance offers vital protection for that investment. It is important to use a competent real estate attorney to review all documents associated with a property transaction and to help navigate the title insurance process.

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