What Are the Potential Risks of Skipping Title Insurance in Florida?

August 10, 2024

A title insurance policy is meant to protect you from one of the most dreaded scenarios you could face as a homeowner. If the property title is deemed invalid for whatever reason, the current owner has everything to lose along the way. This is undoubtedly unfair if you've followed all the rules before the title transfer, but many factors will remain out of your control, involving issues that came up before you even set eyes on your current home.

A bit of foresight will spare you a lot of stress. Let's see how title insurance can be your saving grace.

What Is Title Insurance?

The right title insurance policy will protect homebuyers from financial loss if they're faced with defects in the property title. Among other things, insurance covers different claims and legal fees; you just need to carefully review the policy before making a decision.

When it comes to the purchase of a real estate property, these are the most relevant types of title insurance:

• Lender's insurance policy: This is a fairly standard request from mortgage holders in Florida. It protects the lending institution from financial loss until the borrower has paid off the mortgage.


• Owner's insurance policy: This policy is meant to protect your own investment as the homebuyer. It also protects your ownership rights as long as you and/or your heirs have an interest in the property.

Unlike other closing costs, owner's title insurance is not mandatory, so people may choose to skip it if the insurance costs are too high. The costs of insurance also change according to several factors. The insurance policy will be more expensive if the buyer has claims on their credit or if the property itself has a high market value. Price rates may change across different states, so you can get the assistance of a real estate agent to help you secure the best deal.

Why Get Title Insurance?

Many people might be led to believe that nothing can harm their claim on the property after completing the title search with a real estate service. There's logic behind this position; title searches reveal many of the issues that title insurance is meant to protect you from, giving future homeowners the chance to deal with said issues in advance.

While title searches offer a lof of security, they are not a fool-proof solution, namely because a person is expected to own a property for decades, and there's just no way to predict things for such a long timeframe. Hidden claims are unfortunately not unheard of, and they can sometimes bypass generations before they turn into a legal battle.

These are the main risks of skipping title insurance during your real estate transaction:

• Ownership disputes: As incredible as it may sound, undisclosed liens or hidden claims can put your ownership rights into question, even with your name on the property title. Depending on the case, a missing heir or a creditor may have rights over the property. These claims already signal that you're dealing with an unclear title so you wouldn't be able to beat the other party just by showing your property documentation.
  
  To be fair, these cases are rare since licensed real estate companies usually spot any encumbrances during the title search. Still, when there's enough room for an ownership dispute, you can expect a long, stressful process to come at its heels.


• Legal conflict and attorney fees: A hidden claim will likely result in a full-blown legal battle if the initial negotiations fall through. This means that you must secure an attorney's representation during the entire legal process, with a fee that can easily amount to thousands of dollars.
  
  Naturally, the financial burden is the main source of concern, but you should also consider the mental toll of meeting all the court deadlines with the looming threat of losing the property you've kept for years.


• Loss of property value: An ownership dispute will inevitably impact the property's market value, hindering the chances of long-term investment. If you're hit with a claim while planning to sell or refinance your property, the resulting process will ruin many investment opportunities and change your financial status as a whole.


• A wasted real estate process: If a dispute escalates into a legal process, you may lose both your personal savings and all the money invested into your real estate purchase.
  
  We already touched on the expenses attached to getting legal representation, but you'd still have to add a bigger loss if the court doesn't rule in your favor. No matter how much time and money you've put into customizing your property; if a judge decides that someone else has a bigger claim, you will simply lose your home and all the money that went into the closing costs, mortgage deal, monthly property taxes, etc.

Other financial risks are linked to unpaid debt, either from mortgage lenders, local taxes, contractor fees, etc. Technically, these issues are spotted before settlement so the seller can pay the owed amount, but there are still cases where the debt is passed along to new owners.

So, what does title insurance do?

• It protects your rights over the property if you're dealing with conflicting ownership claims.


• It protects from undisclosed easements meant to restrict your use of the property.


• It protects you from bearing the brunt of a faulty title. This goes from typos and missing characters to fraudulent signatures and forged documents.


• It covers the cost of outstanding lawsuits and pending liens.

Do you want a reliable ally to help you protect your investment? Key Title & Escrow will assist you through the duration of your real estate transaction so you can plan ahead of everything. We can help you complete each relevant step so you don't have to split your attention between different companies, and our services extend to title insurance.

This of course includes issuing your insurance policy on time, so you can cover all your bases and protect your investment.
If you want to learn more about insurance policies, call (305) 235-4571 or toll-free at (800) 547-0006 to get more information. You can also leave your questions via the website's contact form and our specialists will give a prompt response. The specialists at Key Title & Escrow have everything you need when it comes to title insurance in Florida.