What are title exams and title insurance, and do I need them?

You’ve found your dream home and gotten an offer accepted. You’re on your way to a mortgage commitment with a bank and have even picked out your witty door mat. Now your lawyer (hopefully me) mentions something about a title exam and title insurance. You’ve probably heard of title, but what exactly is it?

In Massachusetts, home sellers must be able to convey clear and marketable title, which means there are no defects, claims, or other encumbrances on the prospective buyer’s ownership of the house. Banks, creditors, or other interested parties record documents laying out their interest in property in the local registry of deeds. A title examiner searches back at least 50 years to find if there are any loose ends to tie up, such as a mortgage that has not been discharged or a credit card company judgment that must be paid. The title exam will also reveal if there are any restrictions on the buyer’s use of the property, either from the state or the developer, or if anyone else has rights to the buyer’s property through an easement or the like.

Even with the title exam, homeowner’s title insurance is still important. The insurance policy protects against title defects that could not be revealed through a title exam or arose through mistake, such as forgery, fraud, undue influence, or clerical errors. In short, if someone knocks on your door after closing and says they really own your house, your title insurance company will protect your interest. Your mortgage lender will already require you to purchase a lender’s title policy, but that policy only protects up the loan amount, while a homeowner’s policy will cover the full purchase price. Like all insurance coverage, you hope you don’t need to make a claim on your title insurance, but you’ll be glad it’s there.

At Levine Law, we have always done our title exams in house, rather than rely on third parties. That way, we have personal knowledge of the search and can confidently issue a policy. If you’re thinking of buying a home, visit us at www.levinelawma.com today.