Title insurance is most commonly recommended when purchasing an older home with multiple previous owners. This is because older homes tend to have more complex ownership histories, which can include various title issues such as liens, easements, or claims from former owners. Since these properties may have changed hands multiple times, there could be unrecorded claims or defects in the title that might not be apparent during a standard title search.
Title insurance protects the buyer against potential financial loss due to these title defects that were not discovered before the purchase. Unlike other property transactions, the risk is heightened with older homes because the title may not have been clear for a significant period, and there could be unknown issues arising from previous ownership.
Choosing title insurance in this scenario provides peace of mind and financial security, making it a prudent recommendation for buyers of older properties. In contrast, when purchasing a newly constructed home or a property at auction, the risks related to title issues are generally less complex or easier to address, and commercial real estate may involve different regulations and considerations that don't inherently necessitate title insurance.