To ensure a seamless and effortless purchase of a vacant land, obtaining title insurance is a recommended step. Title insurance serves as a safeguard, shielding the buyer from many financial losses caused by any defects in the title of the property.
When you purchase title insurance, a title company will conduct a title search to ensure that the property's title is clear and that there are no outstanding liens or other issues that could prevent the sale from going through. Once the title search is complete and any issues are resolved, the title company will issue a title insurance policy.
This policy will protect you from financial loss linked to problems that existed before the purchase of the property, such as errors in public records or undisclosed liens. It will also cover the cost of defending any legal challenges related to your ownership of the property. Here are some additional points that the title insurance would cover:
- Hidden financial claims or obligations on the land
- Inaccuracies or missing information in official records
- Deceitful or illegal actions in the land's ownership history
- Outstanding taxes or fees
- Unidentified individuals or parties with a stake in the property
- Errors or discrepancies in the land's survey or ownership documents
- Access or usage disputes on specific areas of the land
- Problems resulting from an improper previous foreclosure process
- Undisclosed restrictive covenants affecting property
Title insurance is a one-time cost, typically paid at closing and it can be included in your mortgage payment if financed. It is not mandatory but it's highly recommended, particularly when purchasing vacant land. Vacant lands have a higher risk of disputes over property boundaries, encroachments, and zoning issues, which can be costly to resolve.
Cases not covered
Issues with the property's boundaries or easements are usually not part of the standard title insurance. Inquire if the current insurance would cover this case.
Additionally, here are few other points that the standard title insurance will not cover:
- Environmental hazards or contamination on the property
- Issues related to zoning or land use that were not disclosed or discovered during the title search
- Known or disclosed defects in the title, such as pending lawsuits or outstanding liens
- Problems arising from the buyer's failure to comply with zoning, building, or other regulations
- Future development or use of the property that is not in compliance with local zoning or land use laws
- Economic or market conditions that may affect the value or desirability of the property
- Natural events such as floods, earthquakes, landslides, or other acts of God that occur after the policy is issued.
In summary, title insurance only covers risks that existed at the time of the policy's issuance and not future events or circumstances. Please discuss with an insurance agent to know the detail of coverage, and to have a proper due diligence and research on the land before buying it.
Price
The typical price for title insurance when purchasing a vacant land can vary depending on a number of factors such as location, size and value of the property, and the type of policy being purchased. Generally, the cost of title insurance is based on a percentage of the purchase price of the property.
For a standard owner's policy, the price can range from 0.5% to 1% of the purchase price. For example, if the purchase price of the property is $100,000, the cost of the title insurance would be between $500 and $1,000.
The cost of title insurance can also vary depending on the underwriting guidelines and policies of the specific title insurance company.
In conclusion, buying vacant land can be a great investment, but it's important to protect yourself from potential financial loss due to title defects. Title insurance is an affordable way to do that. By working with a reputable title company and ordering title insurance, you can have peace of mind knowing that you're protected from any issues that may arise with the property's title in the future.
References:
https://www.kellylegalgroup.com/blogs/does-title-insurance-cover-property-line-disputes
https://www.investopedia.com/terms/t/title_insurance.asp
https://www.valuepenguin.com/mortgages/cost-of-title-insurance
