Considering the details below, would you consider NOT purchasing title insurance? (Assume that you are around 45, will have a net worth after closing of around $1 million, and plan to live in the house for at least 15 years)

Home Built in 1983
Purchase price: $585,000; conventional 15-yr fixed mortgage w/ 20% down
Home was foreclosed on in 1993
Home was subsequently purchased from bank in 1993
That buyer lived in the home until 2007 at which time she sold to her son and his wife who have lived there since
Cost of Enhanced Owner's Title Insurance is around $1500

If you would DECLINE to purchase, please indicate why.
If there is anything in the details that makes you feel strongly one way or the other, please specify.
If you are an attorney or work for a title company, please disclose that as well.

I can't imagine that your mortgage holder wouldn't require you to purchase enough to cover them but I would want it for me too.
Once you pay it off you still want to be covered.

I would never acquire an interest in real property without having title insurance.

I worked my way through law school as a title searcher, eventually working into claims, and ended up Regional Counsel. I went into private practice and handled title claims among other things, representing an insured, or the insurer, fixing the mistakes that inevitably occur. I was later a senior counsel at another very large title insurer responsible for claims and managing claims litigation in the western states.

Later on, I was counsel and then CEO for a group of privately owned real estate investment corporations while I managed several real estate service operations, lending, loan servicing and foreclosures.

Title insurance is a bit of a misnomer. In casualty insurance, the insurer protects you from the losses inflicted on another by your negligence. Auto insurance, fire insurance are examples.

Title insurers protect you from the consequences of their negligence. I was moderately and briefly infamous for pointing out, several decades ago, that title insurance is not insurance at all, but a settlement agreement for the company’s negligence negotiated in advance.

In addition to accurately examining public records to determine title, there are a number of off records risks usually covered, forgery, certain mechanics lien priorities, and now under newer policy forms, all sorts of zoning and restriction violations.

Usually, the seller is obligated to furnish an owner’s policy for the amount of the selling price and pay the premium which includes the search and examination of title. Why would a buyer decline this?

In most residential transactions now, the policy covers many of the off record risks. You have to read the policy to see what is included. There are variations from state to state. Many use American Land Title Association forms, others have state mandated forms.

How do you know that your seller is the legal owner(s)? That there are no liens or encumbrances of record on title? That all prior owners duly and properly conveyed their interests to their successors in the chain of ownership? That the property has legal access to a public street? Usually, these are all taken care of, regular and proper, but if not, this may prevent you from selling the property when you wish, without expensive or lengthy court proceedings. When they happen, you will be glad that problems will be straightened out at the title company's risk and expense, not yours.

You can decline, if you wish, of course.

In the states I have worked, title Insurance is a seller expense. Why not have it? You’re generally obligated to purchase a lender policy for about $50.

JALLEN speaks wisdom, again. What's more, like some of the other attorneys here, he makes it look easy. This is the hallmark of people who really know what they are talking about.

When we purchased our house, my wife, who is much more cautious and careful about such things, said we needed title insurance and some sort of optional additional coverage. A few months later I discovered some sewer district people on our property looking into a manhole they had just uncovered (it was completely buried until then). Without going into all the painful details, the title company ultimately paid the sewer district $25,000 (in mid-1990 dollars) to move the line off our properly (it wasn’t a part of the lines that we were using), as well as paying for the lawyer to represent us in the lawsuit by the SD.

Thanks, JALLAN, for all that.

With those dates and facts I would buy it. Other dates and facts you could pass.

Small cost for what it may save you in the long run

I bought it on my current house as land deeds are able to be traced back to 1500’s. God forbid some descendent from some French family that’s 10 times removed try and lay claim (I’ve heard of crazier stuff)

Not a chance in hell.
JALLEN, as usual, does an excellent job of explaining why.

Net worth of $1M and trying to save $1500 on title insurance?

YGTBFSM, for all the reasons described above.

1989 we bought a house with Title Insurance. All fat dumb and happy until about six months after we moved in. Received a letter from the county regarding a small amount of about a hundred dollars that was due from about five years previous for property tax.

It should have been caught during the title search but somehow missed. While the title insurance company was technically on the hook the agency owner ultimately paid it over the objection of my selling agent who did not want to file a claim for something "as trivial an amount", her words.

I have 30 years in the title insurance business and I assure you that you are crazy not to get it.

Your "enhanced" coverage involves a physical inspection of the property and will run you more.

I’m a lender, mostly in northern California. In my 20ish years doing mortgages I have had exactly 2 buyers refuse to buy owners title on a purchase. Check your escrow company, usually your lenders policy cost will go up if you don’t buy both. In California there’s no law as to who pays what, just “local custom”. In San Francisco buyer usually pays for everything and even down in San Jose it’s split. So ask your seller to pay but if they don’t don’t go cheap.

I’m sure JAllEN could regale us with some amazing tales of nightmare title problems. I’ve had some title people tell me a handful of stories. Mostly people who did something on title without telling their lender and getting Escrow in loved again or maybe slightly nefarious and then the heirs or other people came along and it’s a MESS. An EXPENSIVE MESS.

Your lender will require a title insurance policy for any loan. That should tell you something. This is something not to go cheap on

your lender won't do a loan on the property without a policy. that should tell you if you should buy the property without one.

I’m not even sure in Texas that not having it is an option, but JALLEN’s provided you with all the reasons you should have it.

Do I have stories? I could fill all the episodes of American Greed for several decades with just the ones that are actually true!

Let me add a few details to the discussion.

The value of title insurance policy is in two forms. First, the title insurer is obligated to take care of certain title problems if, as and when they arise. Some potential situations are excluded, correct surveys, shortages in area, location of boundary lines, encroachments, in standard coverage policies, or what used to be called standard coverage policies. Some off record risks, which cannot be discovered by searching and examining public records are covered. One huge problem is forgeries.

The real value, though, is the information in the policy about the property and who owns what. The owner of the fee simple estate, usually, is named, and the owners of all other interests affecting that fee simple title are identified. Delinquent property taxes become a lien. Rights of others to use the property, known as easements, are identified, restrictions on use, deed restrictions, CC&Rs are specified. This is valuable, even critical, information for an owner to know about. Loans secured by mortgages or deeds of trust are shown. Tax and judgment liens against prior owners hopefully have been found and released. If someone tries to use the property, or claims to have a lien on the property, not shown as an exception to coverage, the owner can turn it over to the title insurer to take care of, with some exceptions which are also shown, like liens made, done or suffered by the insured. The searching and examing of the public records to determine all this and the report before you acquire the property is what you really pay for. The “insurance” is free, so to speak

Another point. Casualty insurance covers events that have not happened yet. Title insurance only looks back, at things that have already happened that make your title less valuable. The problem happened in the past but will be discovered or realized in the present, or future. When the title co. make a mistake, the only way a claim can occur, really, your the use and enjoyment of your property is less valuable, and the title insurer has to take care of it, within coverage and policy limits of course.

Reading and understanding the title report before the closing is very, vey important to avoid later disappointment, and consternation. Some rely on the agents to tell them it’s all ok, but That’s not recommended. An agent might, or might not, know much, and has an incentive to not rock the boat by bringing up potentially negative issues.

Nothing beats knowing what you are doing.

As usual JALLEN is spot on and we can all defer to his experience.

When I first got into the Real Estate business I was advised to get title insurance on any property I bought that I couldn't afford to loose ( which is all of them)
Also, be sure to get an Owners policy to protect your interest not the banks and finally Title insurance varies state to state and in Virginia is not usually furnished by the seller. It is the buyers responsibility.

GET IT!

Like others have stated, I would add to NEVER buy a property without title insurance.

I know this is not your situation, and every situation brings something different to the table, but when we bought our first house we had to file a title insurance claim.

The builder used our money to build the next home, etc., and thus was "kiting". He never paid off the subcontractors on our home and we were rudely awakened many times with a Deputy Sheriff literally "beating" on our door delivering mechanics liens.

Thanks heavens we had title insurance to address the liens totaling about 25% of our homes value.

quote:

Originally posted by h2oys:
Like others have stated, I would add to NEVER buy a property without title insurance.

I know this is not your situation, and every situation brings something different to the table, but when we bought our first house we had to file a title insurance claim.

The builder used our money to build the next home, etc., and thus was "kiting". He never paid off the subcontractors on our home and we were rudely awakened many times with a Deputy Sheriff literally "beating" on our door delivering mechanics liens.

Thanks heavens we had title insurance to address the liens totaling about 25% of our homes value.

In the late ‘80s, I had an entire subdivision in AZ where the builder/seller wasn't paying off the construction loans as the individual homes were sold. This occurred because the builder was furnishing the escrow officer with her favorite fine white powders, and considerable romantic attention. She marked the loans “recon to come” in the file and gave him the money!

There were 3 loans. We learned of it when our insureds began to receive foreclosure notices. We took the first loan to foreclosure, bought all the properties, wiping out the junior loans, put our insured and their lenders (also insureds) back in title like it never even happened. It cost a couple of million, but it saved several, too.

The escrow officer was fired from the company she was working for. I wanted her prosecuted, but the powers didn’t want publicity. About 6 months later, I heard she had been hired at another underwritten company. She was fired again.

A variation of that scam almost put a very large title insurance company out of business in the ‘70s, when a large builder was allowed to handle its own payoffs, and didn’t.

quote:

Originally posted by JALLEN:

quote:

Originally posted by h2oys:
Like others have stated, I would add to NEVER buy a property without title insurance.

I know this is not your situation, and every situation brings something different to the table, but when we bought our first house we had to file a title insurance claim.

The builder used our money to build the next home, etc., and thus was "kiting". He never paid off the subcontractors on our home and we were rudely awakened many times with a Deputy Sheriff literally "beating" on our door delivering mechanics liens.

Thanks heavens we had title insurance to address the liens totaling about 25% of our homes value.

In the late ‘80s, I had an entire subdivision in AZ where the builder/seller wasn't paying off the construction loans as the individual homes were sold. This occurred because the builder was furnishing the escrow officer with her favorite fine white powders, and considerable romantic attention. She marked the loans “recon to come” in the file and gave him the money!

There were 3 loans. We learned of it when our insureds began to receive foreclosure notices. We took the first loan to foreclosure, bought all the properties, wiping out the junior loans, put our insured and their lenders (also insureds) back in title like it never even happened. It cost a couple of million, but it saved several, too.

The escrow officer was fired from the company she was working for. I wanted her prosecuted, but the powers didn’t want publicity. About 6 months later, I heard she had been hired at another underwritten company. She was fired again.

A variation of that scam almost put a very large title insurance company out of business in the ‘70s, when a large builder was allowed to handle its own payoffs, and didn’t.

Yikes. That is awful and I am very surprised she did not get charged as it sounds like she is most definitely corrupt.

In our personal situation the builder ultimately went belly up and was a very large company - Mason Homes.

Another builder in town, Liebermann Brothers, after developing a good reputation in town decided to run a scam as well. They built very high end homes and would offer buyers substantial discounts if the builder used the buyers money versus their money to build the home.

What the buyers did not realize, or were to greedy to care, is they had no ownership in the home until they closed on the home. The Liebermanns ran off to Venezuella with a pile of cash. As I recall one died. Later when the spouse of the surviving brother came back to the States, she was promptly arrested and he returned to help her cause. I don't know the final outcome.