Minnesota State Real Estate Practice Test

What happens if the title to a property has issues after a sale is completed?

1. The buyer is not affected if they have title insurance

2. The seller is liable for all undisclosed issues

3. The buyer may encounter losses despite having title insurance

4. The buyer can always sue the title company

The correct answer is: The buyer may encounter losses despite having title insurance

The situation surrounding title issues post-sale is nuanced, especially when considering the role of title insurance. While title insurance typically protects buyers from certain defects and claims against the title that were not identified during the sales process, it does not guarantee complete protection against all possible losses or issues. In particular, if a title defect arises that is covered under the policy, the buyer may still face initial costs, such as legal fees or other expenses incurred while resolving the issue. Additionally, not all title defects are insurable, meaning there could be specific scenarios that expose the buyer to financial losses even when they have title insurance. The knowledge that title insurance does not cover every eventuality is crucial for buyers; thus, understanding that they might still confront losses despite the existence of title insurance aligns with the realities of real estate transactions.