Buying a home is a significant milestone for anyone, and it’s crucial to ensure that your major investment is protected in every way possible. 

One essential aspect of safeguarding your property is having clear and marketable title ownership. Title insurance plays a vital role in this process by providing protection against any future claims, liens, or defects in the property’s title. 

But the day you finally close on your property and receive the keys can be overwhelming, and while title insurance isn’t mandatory, many new homeowners may not realize the value and protection it offers.

What if you didn’t purchase title insurance at closing? Can you still obtain it afterward? Let’s delve into this topic and explore why obtaining a title insurance policy is a homebuyer’s best defense against fraud and financial loss.

Know the Basics

Many first-time homebuyers are not familiar with the minute details of the closing process, associated costs, or why title insurance is needed. Title insurance is a form of indemnity insurance that protects both homebuyers and lenders against any potential loss resulting from defects in a property’s title. 

Here are the most common types of claims or clouds on title that could create a defect — and potentially lead to financial loss and emotional distress:

• Clerical errors or improperly filed paperwork: Even with technological advancements, human recording errors can still wreak havoc on a title chain.
• Mechanic’s liens: If any previous owner had work or renovations done and didn’t satisfy the contractor’s invoice, they can file a lien against the property to guarantee payment before it can be sold for a profit.
• Unpaid taxes: Your local municipalities and the IRS can file liens for delinquent tax debts.
• Probate issues: While it doesn’t happen often, a title can become defective due to overlooked heirs or other issues that can occur if an owner passes away without a will. 
• Encumbrances or other judgments: These can be the result of divorce and other disputes, building code violations, easements, zoning problems, or CC&Rs (covenants, conditions, and restrictions), such as homeowners association rules.
• Fraud and title theft: There’s been a steady increase in real estate-related crimes and wire fraud, and today’s cybercriminals are more devious than ever.

When a piece of property is going through the mortgage process, lenders order a thorough records search from a reputable company to guarantee a clean chain of title. 

A title chain is a chronological record of ownership that traces back to the original source of the property. It verifies the validity of each transfer of ownership, ensuring that there are no gaps, disputes, or conflicting claims

Post-Closing Options

In Illinois and Wisconsin, a real estate contract usually stipulates that the owner’s title insurance policy is paid for by the seller. While the lender’s title insurance is required, the owner’s policy is not. 

Some buyers may choose not to purchase this policy to save a little money, but a qualified real estate attorney will likely recommend that you pay the one-time, reasonable premium and save yourself from headaches in the future. 

If you’ve already had your closing day and signed the final paperwork, it’s not too late to protect your investment. It’s important to do your research and work with a highly regarded title company. This ensures that you receive a clear right to title and you’re protected from any future claims against your property. 

Buying title insurance is especially important for budding real estate investors or those planning to refurbish and flip a residential dwelling, or if you’re buying a home in foreclosure. 

Since claims can arise years after the transaction, not buying an owner’s title insurance policy at closing means you’re at risk during this gap in coverage. Taking care of this when the opportunity arises will give you peace of mind and help guarantee you have the full package of rights to use your property how you wish.

An Invaluable Partner

Title issues can arise suddenly and have a significant impact on those who’ve finally found their dream home or who have purchased real estate for rental income or retirement funding. Claims and other encumbrances can lead to court battles, financial trouble, or even losing your house.

While it’s highly recommended to purchase title insurance at the time of closing, it’s also quite possible to obtain coverage after the fact, and it’s something you should seriously consider.

At Landtrust Title Services, we’re more than just a title company. We have years of experience helping potential homeowners, sellers, and real estate professionals navigate the complexities of performing title searches and ensuring a smooth transaction for all parties involved. Get the answers you need — contact us today!