Question 18

A buyer may BEST gain protection from losses due to defects in the title of property by obtaining an owner's policy of title insurance.

Obtaining an owner's policy of title insurance is the most effective way for a buyer to protect against potential losses arising from title defects. This insurance provides financial coverage for claims against the title, ensuring that the buyer is safeguarded against issues that may arise post-purchase.

A) Obtaining an owner's policy of title insurance

This option is correct because an owner's policy of title insurance specifically protects the buyer from financial loss due to defects in the title, such as liens or ownership disputes. The policy remains in effect for as long as the buyer or their heirs have an interest in the property, making it a robust form of protection.

B) Acquiring a deed to the title

This option is incorrect because simply acquiring a deed does not guarantee that the title is free of defects. A deed only transfers ownership but does not provide any protection against potential claims or defects in the title itself.

C) Signing a contract with the seller

This option is also incorrect as signing a contract does not provide any protection against title defects. While a contract outlines the terms of the sale, it does not address potential issues related to the title that could affect ownership rights.

D) Requiring the seller to show proof of ownership

This option is insufficient for providing protection against title defects. While proof of ownership may demonstrate that the seller has the right to sell the property, it does not shield the buyer from future claims or issues that could arise regarding the title.

Conclusion

The most effective method for a buyer to secure protection from losses due to title defects is through an owner's policy of title insurance, as it offers comprehensive coverage against various potential claims. Other options, such as acquiring a deed or requiring proof of ownership, do not provide the necessary safeguards against unforeseen title issues, ultimately leaving the buyer vulnerable.