Lenders seldom explain the difference between title insurance and a boundary survey. In hopes that someone will benefit, I am going to attempt it.
In simple terms, title insurance protects the insured party from loss due to defects in title. Title is the many rights that the owner has in a particular piece of land. Your deed is only evidence of title. It is not conclusive proof that you actually own the parcel. Title insurance helps in cases where there might be some claim by another to rights in what you think is your land. Again, I am not an attorney, I am explaining things in simple terms so the reader can realize that there are differences in title insurance and boundary surveys.
When you finance a parcel of land, you purchase title insurance to cover the banks losses, just in case. You are not required to purchase title insurance to cover your losses. Be sure you talk to your attorney about this. Do not rely on the lender to guide you. The title insurance policy covers many things, but there is usually a long list of exceptions. Be sure that you understand these exceptions, and how they can affect you.
The Boundary Survey
Title insurance is just that. It covers the title. It does not cover boundaries. That is where the survey is important. Just as the title search might find a defect in title, a survey will find problems in boundaries. There might be evidence of an easement on your land that the title search missed. There could be land that you are purchasing that is being occupied by a neighbor. The title search will not find anything like this. Only a survey will discover these things. There are numerous problems that might be discovered.
I suggest to always contract with the surveyor before you purchase the property. If there are boundary problems, you’ll know about them before the transaction. The present owner can address them before you purchase the property. It might delay a closing, but a delay before the purchase can save headache, heartache, and monetary loss later.
A boundary survey AND Title insurance are two necessary components of any real estate transaction. Do not let anyone talk you out of either. Realtors and lenders are afraid that you’ll back out of the deal if you incur another cost. That cost could multiply if you have problems after your purchase. Your dream home could become a nightmare. A boundary survey might alleviate some of that risk.