Questions about insurance is something I come across quite often with Probidder clients when dealing with investments on foreclosures and bank owned homes around Chicago. This week I’ll be explaining why title insurance is an absolute must-have. Let’s take a look at what title insurance is and what it protects.
First and foremost, yes you can absolutely obtain title insurance on a foreclosure property — both purchased at auction or an REO foreclosure. In regards to foreclosure investments, you the property owner will obtain a title insurance referred to as an “owner’s policy” (this is different from a mortgage lender’s “loan policy”). Your owner’s policy will be insured in the amount purchased or invested in the real estate property. It will cover things like falsifications of title documents, discrepancies in the original mortgage, or any undisclosed successors claiming rights to your property.
Given that Illinois is a judicial state, obtaining title insurance may be even more beneficial here than in a non-judicial state. This is because Title insurance companies have the duty and obligation to defend you in court. It is no secret that investing in foreclosures comes with more title issues and property risks such as outstanding real estate taxes, old tax liens, or an eviction issue. Don’t let the risks overtake your rewards and make sure you get title insurance as soon as possible!
In order to obtain title insurance for a foreclosed property, you’ll need to meet some specific requirements including to:
- Take ownership of the home first
- Become the owner of a foreclosed home when the redemption period for the home has expired
- Get the Sheriff deed for the property
- Buy the owner’s title insurance policy after you’ve secured ownership of the property
Once you have all of these steps sorted out, it is well worth it to obtain title insurance and protect your investment.
As always, Probidder is here for your long term success!