When it comes to buying or selling a home here in Chicago or around the country, title is one of the most important concepts to understand – and also one of the most frequently overlooked. 

In real estate, title refers to who has the legal ownership of, and the right to use, a certain property. During a real estate transaction, a title agent will perform a thorough title search on the property, looking for liens, encroachments, disputes, and any other issues that might affect the seller’s ownership of a home – and, by extension, their ability to transfer the property to a new buyer. Once the title search has been conducted, title insurance comes into play. 

Title insurance is designed to protect homeowners and mortgage lenders from legal challenges that may impact the new owner’s ability to claim clear title to the property. It’s an important piece of the real estate puzzle to understand – and it’s one that leads to plenty of questions from buyers and sellers alike. Let’s see if we can help demystify this crucial concept by exploring three common FAQs about title insurance: 

1.) “What Is Title Insurance, and Why Is It Important?”

As part of the real estate transaction, an attorney or title agent will conduct an exhaustive title search on the property, poring over records to make sure that there are no unpaid taxes, liens, pending legal actions, evidence of fraud or errors, or other wrinkles (like an undisclosed heir) that could cause problems with the transfer of property. The goal is to ensure that the seller has full ownership of the property, and can pass it to a new owner without any issues. 

Title insurance, then, is intended to back up this work. It provides coverage from any legal challenges to the validity or legality of the new owner’s title. It is intended as a protection against financial losses that might arise based on problems or factors not uncovered during the title search process, whether due to oversight, error, or the revelation of new information.

2.) “What Does Title Insurance Cover, and How Long Does It Last?”

Title insurance is intended to provide peace of mind – and practical coverage – to homeowners and their lenders. Broadly speaking, title insurance is meant to offer protection from losses and fees stemming from a number of possible title-related issues, including documentation errors, forgery and fraud, undiscovered liens or other encumbrances, or disputes over land use, easements, encroachments, zoning, and so on. 

As Investopedia points out, whereas most forms of insurance are meant to “protect against future events,” title insurance protects against claims for past occurrences, giving the holder some protection “from financial loss sustained from defects in a title to a property.” 

In most cases, title insurance is a one-time payment, which extends indemnity protection for the entire time that you own a home, and helps protect homeowners against claims that very few other types of insurance can address.

3.) “What’s the Difference Between a Lender’s Policy and an Owner’s Policy?”

Generally speaking, there are two types of title insurance that come along with a standard real estate transaction – the lender’s policy, and the buyer’s/homeowner’s policy. 

The lender’s policy is intended to protect the mortgage lender. It offers assurances that the lender is making a secure, reasonable investment; as a result, this policy is typically required as a condition for receiving a loan, and the costs are paid for by the buyer.

The buyer’s policy helps protect the buyer’s ownership rights to the property, in the event that there are complications or legal challenges to the new owner’s title. In most typical Chicagoland real estate transactions, the sellers cover the costs of this insurance for the buyer, as a sign of good faith. It is a fairly standard part of the closing costs that sellers can expect to face as their sale wraps up. 

Have Any More Questions About the Real Estate Process in Chicagoland?

Establishing title and purchasing title insurance are among the many steps that go into successfully completing a real estate transaction. For buyers and sellers alike, it’s incredibly important to consider all of the actions you can take to protect yourself at every step of the way.

Have any more questions? Looking for help making sure that your “t’s” are crossed and your “i’s” dotted? The Gunderson Law Firm is here and ready to step in.  

We offer a full range of real estate legal services, and our attorneys are also title agents for some of the top title insurance companies in the world. Our team can answer any questions you have about title insurance, title examinations and disputes, and so much more. Our attorneys and staff bring unparalleled expertise and insight to the table, reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, and insurance industries.

Have any further questions about title, or any other aspect of buying or selling a home in Chicagoland? Don’t hesitate to drop us a line or give us a call whenever you’re ready to get the conversation started.