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Title Insurance - Who should pay in a cash Transaction?
Old 09-16-2011, 09:34 PM   #1
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Title Insurance - Who should pay in a cash Transaction?

Last time I bought a house was 21 years ago, at that time I paid for the Title Insurance as required by my lender.

We are looking to buy another house but will probably pay cash for it. Should the seller provide me with a Title Insurance for my protection? Is this a negotiable item as part of a transaction?

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Old 09-17-2011, 02:06 AM   #2
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The policy is to protect those with "skin in the game" ( lender, buyer or both) from something in the past poping up in the future , that's why it's a buyers policy. Great if you can get the seller to pay, just make sure you are the party insurred.

Everything is negotiable , especially in this buyers market.
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Old 09-17-2011, 02:54 AM   #3
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There maybe some state where it is an exceptions, but AFAIK the vast majority of the states the seller is responsible for proving that they actually own the property. The easiest way to do this for them to provide you with a title insurance.

In the past title insurance was just a formality, since roughly 1 property in 1,000 every required the title insurance company to pay up. However, if you are buying a property that has been foreclosed in the past 5 years or so. I'd make sure that you not only get Title Insurance but from the highest rate insurance company in your area. The reason is with all of the controversy over foreclosure practices, you want to make sure that the title company has the resources to defend and ultimately pay in the event of a lawsuit over the title. Unfortunately, most title companies are poorly rated by the agencies BBB- (basically junk bond status) is not uncommon, only a couple have A ratings.
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Old 09-17-2011, 04:30 AM   #4
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Originally Posted by Lakewood90712 View Post
The policy is to protect those with "skin in the game" ( lender, buyer or both) from something in the past poping up in the future , that's why it's a buyers policy. Great if you can get the seller to pay, just make sure you are the party insurred.

Everything is negotiable , especially in this buyers market.
I agree.

I'm not real estate guru, but you hear stuff all the time about title insurance only insuring the bank's interests.

Lakewood90712 is correct, everything is negotiable.
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Old 09-17-2011, 05:12 AM   #5
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+2 to Lakewood. The buyer (and lender if there is one) need to know mortgages, liens, tax levies, and other encumbrances, etc that affect the property, because these issues are passed to the new owner when the property is sold - unless handled before closing. Title insurance insures the buyer from these issues. Usually the buyer pays for title insurance. But if the buyer can get the seller to pay for, then good for the buyer.
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Old 09-17-2011, 05:55 AM   #6
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Title insurance insures the buyer from these issues.
Actually, most policies insure the only the lender for their protection - even though they are not the one's that pay for it.

You must ensure that the policy also covers your interest, as the buyer. I didn't understand this "quirk", even though purchasing four different homes over the years. Here's a reference:

Questions About Title Insurance
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Old 09-17-2011, 05:59 AM   #7
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The owner's title insurance policy is for the protection of the owner. In every instance in which I was involved regarding home purchases (I was a realtor in Louisiana) the person purchasing the property paid for owner's title insurance. That includes my own personal real estate purchases as well. It was part of the buyer's closing costs. The seller does not have a vested interest in proving clear title to the property. Once you buy it, you're on your own and it's in your best interest to protect yourself. I've never seen the seller pay for owner's title insurance for the buyer. They more than likely had purchased it for themselves when they bought the property. Owner's insurance includes paying for a title search. As mentioned above, in general, most everything is negotiable. The original question what Who should pay for title insurance. A buyer doesn't expect a seller to pay their taxes or property insurance, and in my opinion shouldn't expect them to pay for their title insurance either.
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Old 09-17-2011, 07:35 AM   #8
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Actually, most policies insure the only the lender for their protection - even though they are not the one's that pay for it.
Not in the 500 or so I deal with a year. Every title policy I've seen has the owner as the insured, and lender if there is one
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Old 09-17-2011, 08:50 AM   #9
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Two separate policies. There's a lender's title policy and an owner's policy. The lender's policy only protects the lender, the owner's only protects the owner and is the responsibility of the buyer/owner to procure.

I'm talking about Texas and Louisiana, I don't have any experience in other states.
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Old 09-17-2011, 09:51 AM   #10
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This has always puzzled me, shouldn't the seller guarantee that he/she is selling a piece of property with clear title? Lenders demand Title policy from borrowers to protect themselves. Buyers demand Title policy from sellers?
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Old 09-17-2011, 10:02 AM   #11
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This has always puzzled me, shouldn't the seller guarantee that he/she is selling a piece of property with clear title?
Would you depend on a seller (probably somebody you don't know, and even worse in the case of a friend/relative ) to tell you the truth?

Regardless of the sale, I would buy insurance to protect me (and my family)...

Anyway, the seller (if holding the property for a short time) may not be aware (unless they had a title search) of claims against the property, before they purchased it.

As far as I'm concerned, title insurance/title search is "cheap insurance" for the long term...

Also, I stand corrected; I did not realize that this is a cash sale, unlike the traditional use of protecting the lender, per my reference. In this case, it would be (IMHO) a point of negoation of the sale, but if the seller would not provide the insurance I would certainly purchase it myself, in order to protect my interests.
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Old 09-17-2011, 10:08 AM   #12
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When I bought my current house (Alabama), I paid for the lender's policy and the seller paid for my (owner's) policy. Makes sense to me that I paid for the one relating to the loan and that the seller paid for mine as a guarantee of a clear title.

Also, when I sold my last house (Oregon), I paid for the new owner's title policy.
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Old 09-17-2011, 10:40 AM   #13
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Last time I bought a house was 21 years ago, at that time I paid for the Title Insurance as required by my lender.

We are looking to buy another house but will probably pay cash for it. Should the seller provide me with a Title Insurance for my protection? Is this a negotiable item as part of a transaction?

mP
What does your realtor say? He/she deals with real estate transactions in your state every day and should be explaining things to you. Make your realtor earn his/her fee.
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Old 09-17-2011, 11:30 AM   #14
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The mortgage company's title insurance policy covers only the amount of the mortgage to protect the mortgage company's interest.

A buyer's title insurance policy should cover the full appraised value of the property.

When I sold my mother's house (she was suffering with advanced dementia), the buyer's mortgage title insurance company said my notarized POA was no good as far as they were concerned. I was required to obtain a conservatorship approved by the chancery court in the appropriate jurisdiction before I could complete the sale.

This was an inconvenience for me, but the title insurance company was doing what is supposed to do. If I had sold my mother's house and it later turned out, perhaps years later, that I was not authorized to sell her house, the title insurance company would have to pay.
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Old 09-17-2011, 12:39 PM   #15
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The mortgage company's title insurance policy covers only the amount of the mortgage to protect the mortgage company's interest.

A buyer's title insurance policy should cover the full appraised value of the property.
That's the way it is here in Illinois also. 2 separate policies that are generally both paid for by the buyer. I've been involved in a few instances where owners have made claims against their title companies. These make for some interesting situations. Generally the title companies load up the exceptions in their schedule B's to the point where they have their butts covered.
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Old 09-17-2011, 04:17 PM   #16
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I'll tell you how it works in Florida and Michigan, having been a realtor in both states. In the example of a cash purchase, the seller pays for the title insurance. This is an insurance policy purchased by the seller that guarantees clear title to the property. It is issued by a title insurance company, in effect insurring the purchaser that the title history has been searched and that there are no liens or encumberances on the property. If something should come up later, like a mechanics lien discovery, the insurance would compensate the purchaser. So, it's the sellers obligation to provide the clear title, and to provide that the title is clear, the seller purchases this owners title insurance poliicy.

A mortgage title insurance policy is purchased by the buyer to insure against default of the mortgage. At the closing, an owners title insurance is still provided by the seller at the sellers expense but another insurance policy is issued by the title insurance company insuring the mortgage. Normally there is a discount for the mortgage insurance policy because most of the work has already been done by the title company.

Some years back my siblings and I sold our folks home in Ohio to a banker. I was handling the sales agreement on our behalf. I disclosed that I was a realtor in Florida so the purchaser knew what was going on. He presented the family with the sales agreement and in it noted that it was "his responsibility to do the title search and it would be done by an attorney of his choosing and at his expense". I said OK by us. I guess I learned in real estate school about title searches by attorneys. Normally they do a good job, but should they screw up, you would have to sue them to recover any losses.

The owners title policy is issued in the amount of the purchase price. The mortgage policy is issued in the amount of the mortgage.

Editing to add the following note:

Everything is negotiable. For example, if you are the seller, you might talk the buyer into paying for the owners title insurance policy which is typically around $1000 for a $200k house.
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