Below is an excerpt from chapter 14 of Owning U.S. Property – The Canadian Way, by David A. Altro.
DIFFERENCES BETWEEN BUYING PROPERTY IN THE U.S.
vs. CANADA
Title Insurance
Title insurance is one of the key differences between buying property in the U.S. vs. in Canada.
In Quebec, title insurance generally is not applicable for residential real estate and is not used on an everyday basis. However, across the U.S., every purchaser and every bank that provides mortgage money requires title insurance. I deal with title companies in Florida, Arizona, Hawaii and California on a regular basis.
What’s the purpose of title insurance? It protects the buyer from title problems that exist prior to closing on the purchase, but are not detected by the closing agent at the time of closing.
Picture this: Steve and Sabrina bought a condo in Boca Raton, Florida for $500,000 five years ago. They just sold it to Joan, and her attorney’s examination turns up a title defect. Apparently, when Steve and Sabrina purchased the condo from an estate, the will was not properly probated for that estate; as a result, the title was not clear.
Mistakes happen. The title company, or the attorney for Steve and Sabrina, did not properly verify that all the formalities of the probate of the estate were in accordance with the Florida Probate Code.
What happens to Steve and Sabrina now? Well, the beauty of title insurance is that the title company will hire an attorney at its own expense to cure the title defect and cover any of Steve and Sabrina’s damages with respect to any delay or problem in curing the defect. That’s title insurance.
The one-time premium payment on title insurance is typically paid for by the seller, although local custom in the county prevails. For example, in Miami-Dade County and Broward County, the title insurance cost is typically paid by the buyer. However, given the nature of the market, foreclosure and short sale, whatever has been negotiated will prevail.
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