One of the most misunderstood aspects of a real estate transaction is lender’s title insurance. Many lenders, agents and even some attorneys wrongly advise the buyer not to purchase an owner’s title insurance policy because the lender has a lender’s title insurance policy. The buyer is wrongfully told that the lender’s title policy will protect them if there is a title problem. However, lender’s title insurance does not protect the buyer at all.
When someone buys a house and borrows money from a lender, most lenders will require the buyer to purchase a lender’s title policy. This policy protects only the lender against defects in the title that would affect the lender’s security in the property. In other words, it protects the lender’s ability to have free and clear title should the lender foreclose the property. The lender’s title policy therefore, only covers the lender if the lender suffers a loss. The only way a lender suffers a loss is if the lender forecloses but a title issue prevents the lender from selling the property.
Therefore, if a buyer experiences a title issue during their ownership or when they attempt to sell the property and they do not have an owner’s title insurance policy, the buyer will have to pay to correct the title issue. The lender will not have suffered a loss so the lender’s policy will not be triggered.
Since title insurance is a one-time premium and is relatively inexpensive it makes little sense not to protect your investment. Real estate agents and lenders who advise their clients not to buy title insurance run the risk of being sued if a title issue arises that would have been covered by an owner’s policy. Be smart. Always recommend title insurance.
Historical Fact: The power plant that is situated behind EdVenture on the Columbia Canal was constructed in 1896. This Hydro Plant still operates its original turbines. The brick powerhouse contains seven turbine-generators and produces 48 million kilowatts per year.