Understand Title Insurance

Gregory Stanley
Sep 18
2 min read

Title Insurance protects you against financial loss when you buy or sell real estate. Because Stanley & Associates handles a lot of investor closings, we find that title research, or an Attorney Title Opinion (ATO), is a critical first step before buying or selling real property. In Alabama an ATO will not satisfy a lender, but an ATO is the first step in getting title insurance that will satisfy a lender.

What Is Title Insurance?

Title insurance is a policy that covers claims against your property title that you didn’t know existed when you bought or sold real estate. You can’t get a loan on property without title insurance.

• Claims such as a roofer that didn’t get paid under a previous owner.

• Title refers to someone’s legal ownership of the property, not a piece of paper.

A title claim could come up years after you’ve owned property because for example, someone else might have ownership rights that you didn’t know about and when they die their heirs come after their rights in the property. In the case of an overlooked heir, even the person who has those rights might not know they have them.

How Do I Get Title Insurance?

Before your home loan closes, the lender will order a title search from Stanley & Associates. If you are paying cash, or its an investment property, you should ask your closing attorney, Jennifer Scruggs, for title research and insurance.

Stanley & Associates searches the public records related to your home including deeds, mortgages, court judgments, property tax records, income tax liens and more to find any title defects that could affect the lender’s or buyer’s property rights such as:

• Liens placed on the property by a contractor, tax authority or lender who hasn’t been paid. You don’t want to get stuck paying a previous owner’s unpaid bills.

• Easements like a utility company's right to use your property even though you are the owner. The easement could limit your ability to use your property however you want.

• Encumbrances include liens, easements, and also homeowners' association covenants and leaseholder rights.

In some cases, your real estate agent will need to work with the seller’s agent to get the seller to resolve the problem. In other cases, the problem may be significant enough to derail the sale.

Who Pays For Title Insurance?

No one wants to pay for something they don’t have to so here is a rule of thumb for who pays:

The buyer—or, for a refinance, the homeowner—pays for the lender’s title insurance policy as part of their closing costs.
Typically the seller pays for an owner’s policy.