Buying property in New York may feel stressful, especially as you prepare to close. A home may seem ready for sale, but public records could reveal unpaid debts or disputes over ownership. Title insurance protects you or your lender from certain losses if a covered title issue comes to light.
How a title search identifies ownership risks
Before a title insurer issues a policy, a title search checks public records for problems tied to the property. It reviews deeds, mortgages, tax records and court filings to trace ownership and identify issues that could affect your rights after the sale.
The search might uncover an unpaid mortgage, a tax lien or an error in an earlier deed. It could also reveal another person’s claim to the property. An easement or deed restriction may limit how you use the land.
The title company then summarizes its findings in a title report. You may want to review the report before closing and ask about any unclear item. This step helps you identify problems that need attention and exclusions that could limit coverage.
How title insurance protects buyers and lenders
A title search can uncover many problems in public records, but some issues may remain hidden until after closing. Title insurance helps protect against certain covered problems that could appear later.
If you use a mortgage, your lender will usually require a title policy that protects its financial interest in the property, not your equity. The policy is generally issued for the original loan amount and covers the unpaid balance if a covered title problem causes a loss, subject to its terms and limits.
An owner’s title policy protects your interest, subject to its terms and limits. You usually pay a one-time premium at closing. If a covered problem appears later, the insurer may pay certain losses or legal costs. A claim might involve a forged deed, an unknown heir or a public record error.
Understand your title coverage
No title policy covers every issue. You may want to review the policy’s limits and exclusions before closing so you know what protection it provides. Understanding the policy and preparing for possible gaps could help you approach closing with greater confidence.