I read an article about “escrow” in the local paper last week, but don’t remember it being mentioned when I bought my house. Why was that? – WONDERING
DEAR WONDERING: You are correct in recalling that “escrow” was not part of the conversation regarding your last home purchase. The article you are referring to didn’t mention that escrow is a term used commonly in US real estate, but rarely here in Canada with respect to residential sales.
Stateside, the term refers to when a neutral third party (like a title company) facilitates a real estate transaction by holding all funds and documents until the conditions of the agreement have been fulfilled, then transfers ownership to the new title holder. In Canada, buyers and sellers typically each hire a lawyer to handle these details.
When I moved two years ago, my lawyer advised me to buy title insurance. We are buying a new house now, and I’ve been advised to buy it again. Do I really need to keep spending this money when it’s not a requirement in Ontario? – TAPPED OUT
DEAR TAPPED: Your property title is an important official record. It provides legal proof that you own your property, outlines your rights to the land, and makes note of other important details, such as registered mortgages, liens, easements, etc.
While it isn’t a legal requirement in Ontario, I would recommend buying title insurance through your lawyer (many lawyers are reluctant to work without it). As a property owner, title insurance protects you against potential losses related to errors or misrepresentations in your title that could affect your property value. Examples could include fraud, errors in surveys or public records, encroachment issues, undisclosed liens – all things that could prevent your clear ownership of the property and affect your ability to sell, mortgage or lease it in the future. Many insurance policies also include legal services coverage, which protects you if your lawyer makes a mistake during the buying process.
Title insurance is a one-time expense (per house), and a pretty reasonable one at that. On a $500,000 home, you can expect a premium to run about $350. The policy lasts as long as you own the home, whether that’s a few months or several decades, and disappears after you sell the property. Given the protection it offers, I would advise that a policy for your new home would be money well spent.