Title insurance is one of the key pieces of any commercial real estate transaction. Without it, buyers and sellers would most likely find the risks of buying and selling property to be too high. Title insurance has been around in one form or another in the United States since 1874. The stronger your understanding of what title insurance is and its role in commercial real estate transactions, the better prepared you are for negotiating great deals and protecting your assets.
Title insurance is insurance that protects the buyer from any problems with the chain of title to a piece of real estate. Title insurance is used in both residential and commercial real estate transactions. Because the amounts of money are bigger, financial transactions are more intricate, and title is often more complicated, title insurance plays a vital role in the buying and selling of commercial real estate.
What Title Insurance Protects Against
Title is the right to ownership of a parcel of real estate. Deeds convey title between buyers and sellers. But, not all deeds convey full ownership of the property and real estate can be subject to liens or other encumbrances that limit the rights of ownership.
A buyer in a real estate transaction is buying insurance that the title to the property they are seeking to acquire is just as the seller promised it is. If a seller claimed to convey full and clean title to a buyer, but later a third party claimed that they actually had the rights to the property and not the seller, the title insurance will protect the buyer.
Every policy is slightly different, but typically the title insurance will cover the legal fees over the title fight and in the event that the third party prevails and is awarded the property the buyer paid for, reimbursement to the buyer.
Read full article, written by J. McBride for www.propertymetrics.com