Are you considering buying a home in Florida and wondering if you need title insurance? The truth is that title insurance is not legally required in Florida. However, your lender may require it if you are taking out a mortgage. If you’re buying your home in cash, there’s no requirement for title insurance, but it’s still a good idea if you want to protect yourself from financial loss due to accidentally purchasing a property with a ‘dirty’ title.
What Is a Dirty Title?
A dirty title on a home is one where the home has liens and back taxes or a conflicting will or ownership dispute. Now, you may think that the previous owners would be responsible for such things, but that’s not how it works. When you purchase a home, you are buying everything that comes with the home, including the home’s history. If there’s been a lien put on it by a contractor or government entity, you’re responsible for those charges if the home is in your name.
Can a Home Be Sold with a Dirty Title?
A home can be sold with a dirty title. However, lenders won’t finance a home with a dirty title due to the risk of financial loss. As a buyer, you can purchase the home in cash and assume all risks associated with the purchase, including liens, back taxes, ownership disputes and property disputes, but this is typically a terrible idea.
Homes Should Have a Clean Title Before Ownership Is Transferred
Prior to the sale of any home, a title company should be employed to do a complete title search to look for liens, ownership disputes and other problems with the title. The home should not be sold until all disputes are cleared and the title is determined to be clean. This process can take anywhere from 10 to 14 days. However, if extensive problems are found, it can take longer.
If the Title Search Is Clean, Is Title Insurance Necessary?
Yes, because there could be unrecorded problems with the title that could come up months or years later. For example, let’s say the previous owners didn’t pay their property taxes in the year that you purchased the home. The state revenue office may not have gotten around to filing the paperwork on the tax lien at the time you purchased the home, but because you now own the home, you are responsible for the back taxes.
The Basics of Title Insurance
If you don’t want the shock of hidden fees on the house you just purchased, it’s a good idea to get title insurance, which involves paying a one-time fee that protects the buyer or mortgage holder as long as they have an interest in the home. The one-time premium is typically based on the home’s value at the time of the purchase. Title insurance helps pay for:
- Problems with the home’s documents
- Recording and indexing mistakes
- Fraud and forgeries in regards to the home
- Problems with heirs (missing, unknown or undisclosed)
- Unpaid taxes
- Legal judgments against the home
- Mortgages that were not released
Two Types of Title Insurance
It’s important to understand that there are two types of title insurance. The first protects the lender. The second protects the homeowner. Lenders and financial institutions will require the purchase of title insurance that protects them, not the buyer of the home, and it’s important to understand the difference between the two so that you, as the purchaser of the home, are fully protected.
- Lender’s Title Insurance – Lender’s title insurance is required by financial institutions so that their investment is protected, and they often require the new homeowner to purchase this type of protection. Unfortunately, this does not protect the new owner. It only protects the financial institution.
- Buyer’s Title Insurance – Buyer’s title insurance protects the new owner against defects on the title of the home. This type of policy helps pay for issues that arise with the title or deed up to the policy’s preset amounts.
To learn more about insurance and to get a quote, give us a call at 813-689-8878.