How Does Title Insurance Work?
What exactly does title insurance cover?
I close on my first REI property next week and will be buying title insurance. Question is, If I pay $50k for the property, put $10k in repairs. FMV of property is $80k. What happens when someone comes up with a claim on the property?
A. Insurance company pays me fair market value and I leave.
B. Insurance company pays me what I paid and I leave.
C. Insurance comapny pays me what I paid plus what I invested in repairs and I leave.
D. They pay the person with the claim on the property and I keep the property?
if another scenario, please feel free to reply.
thankyou!
Tom :-?
Need to add on: I'm getting a limmited warranty deed when I purchase. Since I am getting title insurace, can I safely transfer a general warranty deed when I transfer without fear of a cloud showing up later?
Type the following into Google and you'll get a host of answers to this:
"what does title insurance cover"
Also, when you get title insurance (I'm assuming you're getting owner's title insurance here), read the exclusions part very carefully to see what is NOT covered. Also ask about the remedies provided by the insurer (which is what your post is asking).
Andy
ok, let me rephrase.
has anyone out there had real life experience with having to use their title insurance after performing a rehab. If so, how well were you covered. By the last reply, do I now have to shop around for title insurance to make sure it covers what I need it to cover, or is title insurance title insurance no matter where I get the policy.
This might vary by state. In Texas, it covers you for the face value of the policy. It cover the lender for the amount of the loan. You can get types of policies/endorsements that can increase the value of the coverage later, after the building/rehabbing is completed. 99% of the policies issued are for the sales price on the owners title policy, so if you need something different, discuss it with the title insurance company you are going through. If they don't give you answers, try another title company.
Ken
Ken, there is probably an inflation rider built into most policies
When you buy a property and close you should at that time have a free & clear title. Then the title insurance you purchase covers you against anyone who comes and says they have an interest in the property. If you have a good title company you should not have any problems w/ this. Talk to your title company, they should be able to anxwer your ??'s. Remember it's better to ask if you don't know...over getting stuck w/ a mess down the road!! Good Luck!