Home buyers - Title Insurance, What is it and Do I Need It?

By ROB SWAN, Contributing Writer, Qualifying Broker

Title insurance, simply put, insures the title to your property. New Mexico is one of those states that commonly uses title insurance in real estate transactions so it is good to know what it is and how it works.

To start with, there is no statutory requirement to purchase title insurance when conducting a real estate transaction. However, if you are buying property with a loan, almost certainly the lender will require it in order to protect their security.

The process is relatively simple, once the parties go “under contract”, the broker usually orders the title commitment from the title company which begins the examination process of the real estate and its title. The title examiner searches all public records for liens, encumbrances, easements, and encroachments that may affect the title and its ability to be transferred and insured. The point of all this is to ensure that you as a buyer are provided a clean title at closing, free from any issues.

Once the title commitment is issued by the examiner, the two most important areas to look at are the “Requirements” and “Exceptions” sections. These two sections spell out what the title company “requirements” are, deeds, survey, etc. and what the title company will not insure,”exceptions”. All the requirements must be met and as many of the exceptions need to be rectified or removed as is acceptable to the buyer. Some exceptions cannot be removed such as utility easements, deed restrictions etc..

If you as the buyer object to an exception, it is the sellers responsibility to rectify. If the seller is unwilling or unable, then the buyer can either proceed with the sale as is, renegotiate, or simply walk away.

So what if there is what you consider to be a minor exception. Let’s say for example, your neighbor is cutting across a corner of the land to access his property even though he has plenty of room on his own side, the title company may still issue you a policy however, they would exempt the minor encroachment that your neighbor caused. What that means is that if your neighbor ever laid claim to that encroachment at any time in the future, the title policy would not cover it and you would be on your own to fight that battle.

Title insurance rates in New Mexico are state mandated so regardless of the title co, the cost for the policy is the same. What will vary is the title company fees, legal document preparation, etc. along with the level of service you will receive, so ask your broker for suggestions and definitely check around.

Title insurance is a one time purchase and will last as long as you own the property, so once it is purchased your property’s title is insured for the entire term of your ownership. Also, you do not have to purchase title insurance at the time of sale, title insurance can be purchased at any time throughout your ownership.

If you have any questions about title insurance or real estate transactions, please feel free to contact me at any time.

Rob Swan

Qualifying Broker

Swan Realty

575-613-4243

rob@swanrealtyinc.com