Is title insurance required for a private sale of a home?


Actually, title insurance is not really a requirement when you buy a home, especially if you are not having the purchase financed. It is usually optional, except for some states that expressly require title insurance during home purchases.

That said, title insurance is still a good idea - even if it just involves a private sale of a home.

A private sale refers to a sale made directly by the property owner. It does not make use of real estate agents. This is in an effort to do away with a real estate agent's commissions.

In this case, it may even be all the more necessary to get title insurance, as private owners may not be as well versed in titles, as well as real estate and legal jargon involved in selling a home. The seller may have missed a key point that will render a title flawed and cause some loss or damages related to the title. Title insurance will help ensure that the title is clear and does not carry any liens or encumbrances.

You can do without title insurance if you can afford to lose the title (like if you bought property that is worth a ridiculously small amount of money). Otherwise, you are strongly advised to have a professional do a title search, and then get the property covered with title insurance.

Now, if the buyer is planning to finance the purchase through a mortgage, the lenders will require him to get lenders title insurance to protect their interests in the loan they provided.

One other thing to check, as a buyer, would be any open permits - or permits that remain outstanding. This is not covered by title insurance and as a buyer, you may be faced with fines and penalties you will have to pay if the seller does not clear these open permits.

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