Florida Real Estate Sales Associate Examination Content OutlineReal Estate Closings and Post-ClosingMedium
A real estate agent is advising a buyer about the importance of obtaining an owner's title insurance policy. Which of the following best describes the primary benefit of an owner's title insurance policy to the buyer?
- AIt protects the buyer's equity in the property against undiscovered title defects.
- BIt protects the lender against title defects.
- CIt ensures the property is free of physical defects.
- DIt guarantees the property's future value.
Show answer & explanationAnswer & explanation
Correct answer: A. It protects the buyer's equity in the property against undiscovered title defects.
An owner's title insurance policy specifically protects the buyer (owner) from financial loss due to defects in the title that were unknown at the time of purchase. This safeguards their equity and ownership interest.
Why the other options are wrong
- B. This describes the function of a lender's title insurance policy, not an owner's policy.
- C. Protecting against physical defects is the role of a property inspection, not title insurance.
- D. Title insurance does not guarantee future property value.
Owner's Title Insurance Benefit
An owner's title insurance policy protects the homeowner (buyer) from financial loss and legal expenses due to defects in the title that existed before the purchase but were unknown at the time of closing.
- Protects the buyer's equity.
- Covers unrecorded liens, forged documents, errors in public records.
- Issued for the full purchase price.
- Lasts as long as the buyer owns the property.
Memory trick: Lender's for loan, Owner's for equity, both for peace and clarity.