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One of the more confusing items on any closing sheet in a residential real estate transaction is the “Title Insurance.”  Title Insurance simply provides insurance to interested parties that they hold “clear title” to the property.  Clear title means that there is no party holding a superior or senior interest in the property.  An example of a senior or superior interest could be a lien or encumbrance based on unpaid taxes or a contractor who holds a mechanic’s lien against the property.  Other items could include a claim to a portion of the property due to encroachment on property boundaries.

 

At closing, two title insurance policies are purchased.  Typically, the Seller purchases the title insurance policy for the Buyer.  The Buyer purchases a policy for the bank or the mortgage holder.  This is to provide protection to the bank’s security interest in the property, insuring to the bank that there is full value in the property.

 

Title insurance policies provide additional information to a buyer and to the bank. For example, the insurance policy will identify “exemptions” to coverage.  These exemptions include things such as utility easements which may be in place against the property.  Other items such as HOA documents and restrictions will be identified in the policy.

 

This article is the 5th in a series of articles pertaining to residential real estate transactions in Utah.  If you have any questions regarding residential real estate transactions, either from the buyer, seller, or real estate agent perspective, please contact us at 801-365-1030.

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