Nowadays, not every person can buy real estate. The cost of square meters is so high that it sometimes takes years to save for the desired home.
And how, in this case, do you survive the situation where a person walks up to you in the middle of a housewarming party, waves a stack of documents and claims that he is the legal owner of your apartment?
The worst thing is that if these documents are in order, then the court will side with him and he will have every chance of losing this property.
It is against such risks that title insurance protects today. To date, in Russia, less than 10% of citizens who buy housing resort to it, while in the West this figure reaches 95%.
What is title insurance and why is it so popular?
Is it possible to protect yourself with their help, and how expensive is the execution of such an agreement?
According to experts, today 2-4% of all concluded transactions are recognized as invalid by a court decision. Title insurance will not return the property, it will only reimburse the money spent on the purchase, but this is enough.
Today, title insurance means insurance against the financial risk associated with ownership restrictions or total loss of ownership of real property. The peculiarity of such a policy is that it protects not from the possible consequences of some events that may occur, but from the consequences of events that have already occurred, of which the insured is not yet aware.
Examples can be given: the apartment is being sold by a mentally ill person, but the court did not deprive him of legal capacity. Subsequently, in the course of legal proceedings, the examination may establish that he did not account for her acts. The court declares the transaction invalid. Or the situation with the heirs. You can buy an apartment without knowing that there is a person who has a legal right to claim it. As soon as you claim your rights, you will lose ownership. The same applies to property that has already been litigated. Or assets seized by the bank. If the borrower disputes the action of the financial institution, he will lose his house or apartment.
The price of the policy usually ranges between 0.2 and 1.5% of the value of the property per year. The amount of the cost is affected by the term of the contract, the selected insurance object and the list of risks. The price is not too high, especially if we take into account that in the event of a loss to the legitimate owners of the property, the insurer not only reimburses the cost of the lost property, but also assumes all the costs of processing the case in the court.
But to secure title, you must gather a large number of documents. The insurance application must be handwritten. It is required to present certificates, extracts that prove the acquisition of the property, the history of the transfer of this property from one owner to another, the absence of encumbrances on this property, etc. Each insurance company may compile this list at its discretion. , but in any case, it will be necessary to provide the insurance company with an extract from the house book, a sales contract, a donation deed, a property certificate, a certificate from the registry authority, a property plan. Some documents must be certified by a notary.
Those who buy real estate on the secondary market and those who buy houses in new buildings can use title insurance. Both there and there there is a risk of losing the right of ownership. In the secondary market, risks are associated with privatization, purchase and sale transactions, and the illiterate inheritance procedure. The risks are also known in the primary market. These include “double selling”, stock fraud, real or fictitious bankruptcy of the developer.
Mortgages actively stimulate the development of title insurance. Bankers are increasingly including title insurance as a prerequisite for obtaining a loan. Especially if any collateral object raises doubts or suspicions.
Basic feature of title insurance:
- Not all property can be insured. The insurer assesses the risks, if he finds them too high for himself, he will reject the insurance. To assess insurance risks, underwriting is used, which is done by both the insurance company and third-party organizations, for example, real estate agents.
- Most of the time, the item is insured for market value. This is done so that in the event of unforeseen circumstances, the owner can receive the amount actually paid and not indicated in the documents.
- The client, in order to receive payment from the insurance company, must participate in court hearings as a defendant. The insurance company is not obliged to represent the client’s interests in court.
Title insurance is a reliable way to protect yourself from potential financial loss.
A small initial amount of the insurance payment can guarantee the full payment of unsuccessfully invested funds. To do this, you must contact a reliable insurance company, known in the market and that guarantees the execution of all payments in the event of an insured loss. It is definitely not worth applying for title insurance from overnight firms that promise to insure real estate at a very low cost.