So you have saved your down payment and closing costs and have placed an offer to purchase on the home of your dreams.
But then you are completely gobsmacked when your real estate professional comes back telling you that the seller is offering title insurance in lieu of a real property report. What the heck is title insurance and is it right for you? Let’s find out shall we.
While purchasing a home may seem like a straight forward thing, sometimes title related issues can occur. Examples of this are renovations done without permits, municipal work orders, utility and condo assessments, liens, encroachments, outstanding taxes and worst of all, fraud. All of these could impose unforeseen costs on the purchase transaction and ultimately affect the ownership of the property.
Title insurance exists to make sure those costs don’t come out of your pocket.
Perhaps an example would be helpful?
Your dream home has a lovely addition on the back. The current homeowner was quite handy so he did the work himself but he did not bother getting a building permit.
Had he done so he would have been told that the proposed construction was not allowed as it was being built on a utility line. If the utility company ever needs to access that line they have the right to remove the addition.
Title insurance would protect you against the costs that would be incurred.
Title insurance is a regulated insurance product which provides protection for homeowners and their lenders. The benefits are – it can replace a RPR and proof of municipal compliance saving time and money on the purchase transaction. It also allows a transaction to close on time thus avoiding late fees incurred while waiting for title registration. Coverage of some of the most common post-closing issues facing homeowners.
Well this sounds great you say? Sign me up you say? Let’s take a quick look at what exactly is covered under title insurance.
1. Coverage for losses relating to improvements added without building permits.
2. Encroachments – an example of this is your garage’s eaves hanging over your neighbour’s property line.
3. Registration gap time.
4. Work orders against a property.
5. Non-compliance with agreements on title (like the addition over a utility line).
6. Real estate title fraud (someone tries to place a mortgage against your home).
7. Condominium special assessments payable by the previous owner.
8. Outstanding property taxes.
9. Zoning defects.
10. Errors in the public record.
So while a RPR can show you the problem, title insurance can provide a remedy. If a problem is identified and all possible avenues of remedy have been exhausted then title insurance could be your ace in the pocket.
a) No out of pocket expenses for legal advice or other professional reports
b) The expertise to restore title or correct defects
c) An efficient process so that your time and resources are not spent fighting this battle
d) The convenience of all advice through one channel.
e) Coverage for up to two times the value.
Title insurance usually costs about $249 plus GST and is paid through your lawyer as they are the ones purchasing it on your behalf. It stays in effect for as long as you own your home. More and more often lenders require title insurance. Usually it is stated in the paperwork you sign to accept the mortgage
But wait! Before you rush right out and buy it, remember that title insurance only pays after all other avenues have been exhausted and as with any insurance product there are things which are excluded. It is certainly worth your time to read your policy so you are aware of any exclusions. So there you have it, title insurance in a nutshell.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.