Owner’s title insurance contains a fascinating history, dating back over 150 years to 1868. In the case of Watson v. Muirhead, the transaction conveyancer discovered that the property in question was under lien. Although an attorney advised the conveyancer that the lien was invalid, a court ruled that it was in fact valid, after all.
As a direct result of the case outcome, a consortium of Philadelphia conveyancers banned together to form the first title insurance entity. With a clear goal in mind, the group set out to prevent innocent home buyers from falling victim to matters such as the aforementioned.
Today, many in the real estate industry debate the merits of an owner’s title insurance policy. While lenders typically require their own policy to protect their interests, the same as generally not said for the end homeowner. However, as the real estate market progressively grows in its complexity, we firmly believe that an owner’s policy represents a saving grace for many.
Owner’s Title Insurance for First-Time Home Buyers
For those unacquainted with the real estate closing process, prospective first-time home buyers often are confounded with the numerous fees that accrue by its conclusion. In the case of an owner’s title insurance policy, homeowners may be surprised to learn that purchasing a property isn’t as simple as signing a contract. In fact, many properties throughout the country are subject to “defects”, or issues with the property’s true owner.
Owner’s title insurance protects homeowners against many of these defects. As a baseline understanding, any given real estate property can fall victim to undiscovered tax liens, forged signatures, recording errors, undisclosed easements, title claims, and other previously hidden challenges.
For those who opt to purchase an owner’s title insurance policy, the vast preponderance of legal fees will be covered in the event one of those issues is identified. Furthermore, an owner’s title insurance policy is generally a one-time fee, as opposed to a monthly premium that consumers see with other forms of insurance. Overall, that fee covers the homeowner for their entire life of owning a given piece of real property, making it a highly cost-effective solution.
Further Reasoning to Purchase an Owner’s Title Insurance Policy in 2022
Beyond the legal coverage, cost-effectiveness, and scope of errors, an owner’s title insurance policy helps with numerous practical scenarios in 2022. For instance, 2021 saw a massive volume of home refinancing activity. Home prices rose 19.2% in the first half of 2021, compared to the prior year. In addition, mortgage rates plummeted to record-low levels throughout much of the coronavirus pandemic.
During those times, home buyers were actually paying less for the cost of their refinancing activity. While many homeowners may not realize this, a new owner’s title insurance policy must be purchased when a property is refinanced. Although mortgage rates increased substantially since the first of half of 2021, Plymouth Title Guaranty Corporation is still seeing plenty of properties being refinanced.
But what about those who are buying their first property? In 2021, first-time buyers generated 31% of all home buyers, with the vast majority coming in between 22 and 30 years old. While many first-time buyers don’t always opt for owner’s title insurance, homeowners can still fulfill the purchase after closing. Having said that, tackling the issue prior to the real estate closing offers the benefits of combatting public records errors, outstanding liens, and surprise property heirs out of the gate.
The Path Ahead for Homeowner in 2022
Although not every homeowner purchases an owner’s title insurance policy during the closing process, there is always the opportunity to go back and complete the purchase. Additionally, homeowners pursuing a refinance can find safe haven in buying a policy, ensuring that they can avoid monetary loss in the years to come due to any of the earlier mentioned title issues.
To learn more about purchasing an owner’s title insurance policy, or for questions regarding our escrow services, please speak with a representative at Plymouth Title Guaranty Corporation.