Question:

Is the typical cost of title insurance affected by bad/unmarketable title?

Answer:

The typical cost of title insurance stays the same and the title policy holder will be somehow indemnified if unmarketable title is found after closing the real estate transaction.

If title is found not to be marketable prior to settlement, typically the buyer has the right to withdraw from the sale and receive their earnest money deposit back. Also, the title insurance costs will be reduced if a title is found to be defective but the buyer decides to take the risk and purchase the property.

What is Marketability of Title?

This is a concept regarding ownership of real estate. When someone is buying a house they do not expect that anyone else may have claims on it. The seller is expected to provide a marketable title - that is, free from any liens as a simple example.

However, some properties may have claims on them. Unpaid mortgage or other debt secured by the property creates a lien on it that gives the creditor right of ownership to the property. The lien may be old one, dated tens of years in the past. Some states have limited the time period an unsatisfied lien can exist on a property to simplify real estate transactions.

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