What if you spent hundreds of thousands of dollars on a piece of property and a few months later something goes wrong? Someone appears with a legitimate claim to the property or a lien against the property or unpaid taxes appears that wasn’t caught in the title search.

You could suddenly be responsible for a considerable amount of money. You could even lose your investment.

But not if you have title insurance.

Let’s look at why property investors like yourself need to buy title insurance for your investment property.

What Is Title Insurance?

First, let’s define title insurance. This policy protects against claims, fraud, or mistakes on the property’s records that could negatively impact you. Policies will vary but most at least cover:

  • Back taxes
  • Liens or judgments
  • Adverse ownership claims
  • Forgeries or fraud in the chain of ownership

If you take out a loan, your lender will require lender’s title insurance. You have to buy the policy, but it covers their investment. You can also take out an owner’s title insurance policy that will protect your portion of the purchase.

Reasons to Buy Title Insurance

So why should you buy title insurance? Let’s look at a few reasons why.

  1. You Could Lose Your Investment

If someone mounts a successful claim against the property you purchased, you could lose your entire investment. Owner’s title insurance is a one-time premium that lasts until you no longer own the property. Looking at what you could lose, the cost of title insurance is relatively insignificant.

  1. Title Claims Are Expensive

Even if you successfully refute a claim against your property, you’ll spend a lot of money defending it. You might not only have to pay a lawyer but also pay for investigations, litigations, or a settlement for an adverse claim. Title insurance includes coverage for the legal expenses involved.

  1. Forgery or Fraud

Commercial properties are often owned by complex legal entities. This makes it relatively easy for someone to commit fraud or forgery during the sale. It’s also possible that a seller may lack the authority to sell the property, although they themselves may believe they have it.

Title insurance covers these problems and others that may arise if the seller doesn’t properly transfer the property to you.

  1. It’s Relatively Cheap

How much does title insurance cost? Well, the cost of the policy will vary depending on the location of the property and its value. To get an idea, check out this guide to title fees. However, the one-time premium is quite inexpensive compared to what you could be risking if you don’t buy it.

  1. Peace of Mind

Buying an investment property is stressful enough without leaving yourself open to potential problems with the title. The peace of mind that comes with title insurance is well worth the relatively inexpensive price of the policy.

Don’t Forget to Buy Title Insurance

Whether it’s your first or fiftieth investment property, don’t forget to buy title insurance. The risks that you are leaving yourself exposed to by not buying it are simply not worth it.

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