What is Title Insurance and do I need it in New York

When I represent clients in the purchase of a condo or home in New York, they always ask me what the deal with title insurance is.  They actually say “Daniel, what’s the deal with title insurance?”

Title insurance is an often misunderstood concept in real estate, and people hate the idea of paying a company when they can’t understand what it is they’re paying for.

So, for a clear explanation, I went straight to the top.  James Melnichok is the Managing Director of Client Services at TitleVest, one of New York largest title insurance companies, and a company we often work with for many of our real estate transactions.

When I asked him to describe what title insurance was and why clients need it, here’s what he had to say:

Title Insurance provides protection of your rights as an owner after you close on the purchase of your property.  Buyers should be familiar with the two types of title insurance policies (owner’s policies and loan policies) and who they protect. The loan policy insures only the lender against covered title defects up to the amount of the insurance.  While an owner’s policy protects your interest in the property against covered defects. The most common types of title issues are errors in public records, open mortgages, unpaid taxes, unknown liens against the property, missing heirs, forgeries and survey or boundary issues.

Having a title policy can protect your interest in the property down the road when you sell or refinance the property. Title Insurance differs from other kinds of insurance in that it is paid for in a one-time payment at closing, provides coverage for as long as you own the property, and there is no deductible. Also, it covers existing title defects on a property, rather than insuring against future risks. The cost for title insurance is calculated based on the purchase price of the property and if the purchase is being financed, the loan amount. The majority of states, such as New York regulate the premium rates that an insurer may charge.

Here in New York the title process includes three essential services. The examination process whereas a title company searches tax, court judgements, deed, encumbrance, as well as state and local public records.  The title clearance process which includes working to resolve any defects that may have come up in the title search.  And finally the closing process where all of the parties gather to review, finalize and close the property sale.

Every property has a history.  Ordering a title search and purchasing title insurance is important part of the due diligence process in buying a home.  By resolving issues that come up in the title report before you close, you are protecting yourself from potential title problems you would be responsible for if left unresolved.

The basic idea is that title insurance tells you everything you need to know about the condo or house that you’re buying.  It also provides piece of mind should anything go wrong (your neighbor built a fence that encroaches on your property, the deed that was transferred to you has issues, etc.)

Cost is another item you should be aware of.  I covered the typical costs you’d expect to pay when buying a condo in New York here.  The easiest way to find out what your potential title costs would be to email us or  you can always check the company’s own online calculator here to get a sense of what you’re going to pay at closing.

But don’t take it from me, take it from Dan Sicina, a manager at Titlevest.  He discusses everything title insurance in the short podcast below.