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What is the role of title insurance in real estate transactions?

Whether one is buying a private home, an investment property or commercial real estate, he or she may notice in the closing paperwork that he or she is spending a few hundred or even a few thousand dollars on title insurance.

The idea behind title insurance, like other types of insurance, is not to have to use it. It exists not so much to protect the physical structures on the land one is buying as it is to secure the legal right of the new owner to hold the land in the first place. Of course, in a normal transaction, a person legally gets the property he or she purchased with no encumbrances.

However, unlike personal property, it is not always easy to determine who all owns a piece of real estate and to what extent. One cannot, after all, pack up an acre of land like one can a small item or even something as large as a car.

Since ownership of real estate is largely a creature of paperwork and the law, it is quite possible for someone not to really own the land that he or she purchased or, perhaps, own the land only subject to certain conditions, including someone else’s lien. These are called title defects, and they can in the worst case scenario cost a person all of his or her investment. In other words, he or she may legally be forced to turn over land that he or she thought he or she owned.

This is where title insurance comes in to play. A title insurance company agrees either to make things right when there is a title defect or, alternatively, pay for the loss in the value of the property.

Should a Blacksburg, Virginia, resident have the misfortune of discovering a title defect on their new property, getting the help of a real estate transaction attorney in filing and processing a title insurance claim may be important.


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