Hidden Title Defects
Property title defines your ownership rights. Defects in the title will restrict or even invalidate them. Some of these impediments may be hidden, due to errors or omissions in the land registry. You'll be protected by having the property surveyed or title insured.
Why You Need A Survey
A land survey will give you more insight into what you buy. It's a set of drawings and documents prepared by a licensed professional which defines legal boundaries of the property, location of all structures, fences, driveways and adjacent roads.
Lenders may ask for a survey to minimize own risk. They want to make sure there're no title defects which might forestall a smooth sale when the mortgage isn't paid off.
Surveys provide an accurate, up-to-date visual representation, based on actual field measurements. You'll see precise dimesions of the premises, which may not correspond to abstract data included in the title.
Other title problems to look for in a survey are:
Survey results have to be reviewed by a lawyer, and probed for municipal and subdivision violations. When defects are found, you should consult your lawyer how serious they are and what can be done about them.
Hopefully, the seller already has an up-to-date survey. Otherwise, make your offer dependent on the current survey and negotiate who is going to pay for it.
What Is Title Insurance
Title insurance pays for expenses associated with repairing the property title. It's another approach to the transaction closing which can be used instead of a survey.
If a transaction is title insured, the land survey and some off-title searches can be skipped. The insurance doesn't warrant a clear title, but it compesates new homeowners when defects unknown at the time of the purchase manifest themselves later.
You'll be covered for a variety of losses resulting from encroachments, easements, fraud, liens (financial claims registered on the property), and any other title related issues detrimental to your ownership.
There's a one time premium which will cost you about $350, depending on the property type and the price.
Some title insurance companies offer a fixed cost closing, so you can plan your expenses without being caught short of funds on a closing date.
Other services may include the deferral of closing costs. You can get an interest free loan at a fee around $100. After six months the loan has to be repaid or converted to an unsecured credit with a higher rate.
Which Option To Choose
Although most lenders agree to close transactions without a full disclosure, title insurance doesn't entirely eliminate the need for a survey.
There're reasons to believe that pursuing both closing options concurrently will serve your interest better: