What is title insurance, do I need it, and who pays for it ????

For many of us buying a home is the most substantial, single investment we’ll ever make and all of us want to make sure we do it right, so today I wanted to talk about title insurance.
Title insurance is a contractual obligation between you the buyer (and/or your lender) and the title insurance company. The title company you pick will provide for a premium payment an insurance policy against future losses that might result from a variety of possible title defects or encumbrances.
Title is a collective term that encompasses your legal rights to own, possess, use, control or dispose of real property – land. Title takes into account all previous land ownership, uses and transfers of land use and ownership. In order to legally transfer real estate property, you must perform a title search to determine the title is clear or free of defects or inappropriate encumbrances. A title defect is a problem or omission associated with the title that negatively affects your ownership rights to the property. Here are some possible defects, forgery, confusion caused by similar or identical names, signatures of minors, mental incompetence, fraud, incorrect marital status, ect. For example, a title defect could be an undisclosed note (encumbrance/ private loan) is still owed on the property  and after you purchase the home or land the note holder forecloses and then owns the home or land that you just purchased. Also keep in mind that if you are borrowing money to purchase the home your lender will want assurance that no one else has a claim against your home – the collateral for the loan.
Customarily in the state of Arizona the seller pays for the owner’s title policy to insure that they are able to convey marketable title (free and clear of defects and encumbrances). If the buyer is obtaining a loan to purchase the home the lender will require that the purchaser secure and pay for a mortgage title insurance policy insuring marketable title to the lender in order to protect the lender’s lien.
Title insurance is a small price to pay to protect against title claims that can affect the value of the home or land you are buying.