Does Florida Require Title Insurance?
August 09, 2023Real estate transactions can look different among different states and counties, but there are important requirements that most of them have in common, no matter the case. Case in point, title insurance is one of the important parts of the process, meant to protect sellers and buyers alike.
If you're about to enter Florida's real estate market, we tell you all you need to know about title insurance and its role in local escrow transactions.
What Is Title Insurance?Most clients request an insurance policy from the get-go as a sure way to protect future owners and lenders from financial loss. Title insurance policies can help you deal with liens, debt, hidden heirs, and other undisclosed claims. They protect your rights as the property owner and cover the legal fees that could easily result from any of the issues mentioned above.
If you're taking a mortgage before buying a house, chances are your lender will have title insurance as one of the main requirements.
So, are you required to get title insurance if you want to buy a property in Florida?
Clients in a real estate transaction are not legally obligated to obtain a title insurance policy. With that said, all real estate transactions statewide must offer a title insurance policy under Florida law, namely an owner's insurance or a lender's insurance policy.
This is how title insurance helps the participants in a real estate transaction:
For the buyer: Many of the benefits of title insurance are obvious from a buyer's standpoint. This is one of the biggest financial transactions most people do in their lifetime. Buyers pay large amounts of money, sometimes after saving for years, and they come in with huge expectations. A homeowner's title insurance is a welcome asset to protect an owner's rights in the event of lawsuits or other claims.
Some buyers feel more confident when they're paying in cash because the transaction wouldn't be tied to liens placed by mortgage holders. Still, this doesn't change the risks owners can come across years down the line. An owner's title insurance remains effective for as long as you and your heir(s) hold ownership rights over the property.
For the seller: Title insurance can prevent financial loss, starting with the closing costs. Buyers often take over the biggest bulk of the escrow costs, but as a seller, you're still making an investment. These policies protect your earnings after a title transfer, even when you're not the policyholder. If the owner suffers from the consequences of a dirty title after following all the steps during a real estate transaction, sellers don't have to be saddled with all the payments. Title and escrow companies will take responsibility for a faulty title search and the insurance policy will keep you from having to cover the expenses of a legal process.
Whatever the case, your title needs to be free of liens and encumbrances before you list your property for sale. If something comes up during the title search, you might have to cover the costs and lose the buyer's trust.
For lenders: Problems like hidden liens, mistakes in public records, unpaid taxes, ownership disputes, or a fraudulent sale can make lenders lose the money they've loaned for the mortgage. A lender's insurance policy protects the lender's financial interest while favoring their claim on the property over other unpaid debts. Its protection also prevents misunderstandings in specific scenarios where the property is passed from a deceased owner to their heirs and the debt is still in place.
If you have a real estate lawyer following the process from the beginning, they can support you if the title search reveals a lien or debts of any kind. They can help manage all the paperwork and reach a positive outcome from the negotiations.
Title Insurance Can Help With…
- Identity theft, forged signatures/documents, and other types of fraud
- Errors or omissions on public records, property deeds, and other legal documents
- Omitted/unknown heirs and undisclosed claims
- Unreleased mortgages and other outstanding liens
- Unpaid taxes
Keep in mind that the terms of insurance policies can change from one county to another, so make sure to ask about the policy's benefits before signing the deal.
Protect Your Interest During a Real Estate TransactionTitle insurance is important and realtors all over Florida agree on this point. It comes at the heels of various safety measures to ensure transparency during the process. On top of reviewing the title and other records, sale agreements and contracts need to be validated after the negotiations, ensuring that buyers and sellers understand the conditions they must fulfill.
Sadly, there are multiple ways in which a title can be defective. That's why it's not exactly uncommon to see ownership disputes years after a property transfer. Securing the right insurance policy is not an afterthought; it can make or break your odds if you have to calculate your litigation costs.
There's no law designating who's in charge of paying for title insurance. Each county has its own standards, and you can always hash out the most convenient terms during the negotiations. You should also go over the costs with your escrow company as there are many factors at play when calculating the price of a homeowner's insurance policy, like the property's location, its square footage, and the owner's credit history.
The bottom line is that you can never be too careful, considering that some title defects can go unnoticed for months and even years. Title insurance is a necessary precaution that can help you be at ease after the transfer, once you take on all the responsibilities that go with acquiring a new property.
Key Title & Escrow helps you complete all the steps in a successful real estate transaction, including the necessary insurance coverage to protect you in the long run. Nothing will slip by our specialists while reviewing the escrow documents, and we count on the latest technology to track hidden claims or small errors. Secure the expertise of our agents and we'll make sure you have nothing to worry about on the closing date. If you're about to start a transaction as a seller or as a buyer, call (305) 235-4571 or toll-free at (800) 547-0006 for more information. You can also fill out the contact form on this page to request any of our escrow services.