After months of searching, you’ve finally found a perfect home. It’s a great place to raise your family in the heart of Kentucky. The house looks terrific, in a prime location with a functional layout. The kids will love the big backyard. But, some time down the road, you might discover a lien on the property. You could be on the hook for these unpaid debts as the new homeowner. This is where title insurance can protect you.
The Basics of Title Insurance in Kentucky
Kentucky title insurance protects people against property title defects. Buyers expect a clear title when they buy a home. That only makes sense. An initial public title search may confirm this, but defects can arise later on. These defects can impact their ownership or use of the property and can come at a high cost. That’s a worrisome situation, indeed.
The title insurance policy can cover related costs if something comes up later. These may include legal fees, potential settlements, and other related expenses to resolve the title defect. The specifics of each policy can vary. Be clear about what it does and does not cover.
There are two types of policies for Kentucky title insurance. Buyers often get both when they close the deal to buy the house.
- Title insurance to protect the lender. This lasts until the loan has been paid off. This is the case if you’re getting a mortgage. The bank would ask you to buy title insurance as part of the mortgage requirements. After the loan is terminated, the title insurance coverage ends too.
- Title insurance to protect the owner. Usually, this title insurance remains in effect as long as the owners (or their heirs) keep an interest in the property. If a long-buried lien resurfaces even 25 years later, the title insurance can still protect you.
When and Why Do I Need Title Insurance in Kentucky?
Generally speaking, new homeowners must buy title insurance before transferring the property to them. This is because title insurance protects against title defects before the property purchase. If the sale is complete and the property has already been transferred, it can be difficult to get title insurance.
Kentucky lenders usually require title insurance if you are taking out a loan (mortgage) to pay for the property. Even if you are buying the property wholly in cash, taking out a title insurance policy to protect your investment can be a good idea.
Title defects can be both problematic and expensive to resolve. Title insurance offers peace of mind. Should anything come up with the title, this policy can cover associated costs.
How Much Does Title Insurance Cost?
The cost of title insurance in Kentucky is usually based on a percentage of the purchase price. The exact location will affect this rate. Generally speaking, you can expect to pay about 0.5% of the home price, but this can vary. It’s best to speak with a professional to get an exact quote. Buyers usually pay a one-time fee for title insurance at the time of closing.
Examples of Defects That Title Insurance Should Cover in Kentucky
Many title problems can affect the ownership and use of a property. Some examples include:
- Liens are legal claims against a property for unpaid debt. There might be an outstanding mortgage, for example. The government can take out a lien for unpaid back taxes. A conflicting will with unknown heirs can also result in liens on the house. Did the previous owner have the legal right to sell the property?
- Easements are legal rights to use part of the property. A common example is a shared driveway. Undisclosed easements may arise after you buy a house. These can impact how you might use or develop the property.
- Zoning issues can complicate how you can and cannot use a property. The house may violate a municipal zoning bylaw. You might not know about this when you buy your new home. Title insurance can offer some protection here too.
- Encroachments are when part of a property extends onto another property. Fences are a common example. Encroachments can lead to legal disputes with your neighbors. They can affect how you might use or develop the property. A fence may encroach just a few inches. But, driveways and building extensions can be significant.
- Forgeries are one example of title fraud. A fake or fraudulent signature on a legal document can affect your right to the property. The fake signature invalidates the document, like the deed to the home.
- Boundary disputes may arise from surveying errors. If the property lines are unclear or disputed, you may face legal challenges from your neighbors. What land do you actually own?
How a Central Kentucky Real Estate Lawyer Can Help
Buying a home is often the single largest purchase someone makes in their lifetime. You don’t want your dream home to turn into a nightmare over a lien that pops up months or years down the road.
A Central Kentucky real estate lawyer can assist you in filing a claim with your title insurer and can work with the insurance company to remove liens and clear the title. If your title insurer denies a valid claim, your lawyer can pursue the appropriate action to ensure that you receive the coverage that you deserve.