mitchjav
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If I'm buying a new construction home from a builder and not taking a mortgage, is there a reason to take out title insurance? What are the pros/cons to doing this?
Title Insurance
- Thread starter mitchjav
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Title insurance will ensure there is clean title to the land and make sure that all the contractors have signed off on their work/payment so that you don’t have any issues with a subcontractor not being paid and placing a lien on your new home.
Freedom56
Thinks s/he gets paid by the post
It depends on your state. When we bought our condo in Florida in 2011, I paid cash and there was no reason to get title insurance. I did a search on the property myself as Florida is pretty open with public records. Furthermore, escrow companies are required to clear all liens and loans when the transaction closes. Try and get the builder to cover that cost since you are paying cash. In our case, in Palm Beach County, the seller pays most of the closing costs for all cash transactions. We were required to pay only $173 on an all cash deal.
Peter
Full time employment: Posting here.
I may be in a tiny minority on this, but I claimed on title insurance with a good outcome. Short version of a long story: there was a mix-up over merged lots, which wasn't spotted on the initial title search. Later the county tracked me down asking why taxes on one of the supposedly merged lots hadn't been paid. The title company accepted responsibility without any question and fixed the problem to everyone's satisfaction.
Sniggle
Recycles dryer sheets
I recently purchased a piece of land, and they wanted $900 for title insurance. Since I will be required to get title insurance in 3 years when I get a construction loan, I did not buy it.
I also took into account that the land had been in the same family for 80 years.
I also took into account that the land had been in the same family for 80 years.
A title company's liability for missing a lien or claim on a search is only $1,500.00. Their liability when you purchase a policy is the full amount of the insurance purchased. So if the search fails to identify a $300,000.00 mortgage, or a mechanics lien, or an easement or a judgment or anything else of record, you have only a $1,500 claim against the title company for a negligent search (if you do not buy insurance), yet you could lose your home. Without going into details, I am/was in the real estate business and I buy title insurance on every purchase.
jazz4cash
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Title insurance seems like a bargain to me. Is there some other way to assure that something weird didn’t occur to the title in the past? A relative had a problem like that. A lot of property records got screwed up in the ‘07 bubble.
PaunchyPirate
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I purchased my previous home directly from the builder. It was a model home for the subdivision. During the closing process, my title company felt that the builder had not adequately provided the legal documents that traced the purchase of the subdivision land from a local farmer and the subsequent delineation of individual lots for resale.
The builder said it was. And they had already built and sold about 50 lots/houses in the subdivision with no previous issues, so they said. The title company held firm until the builder supplied some additional document.
I would want title insurance in case this had not been caught if it became an issue when I went to sell the house.
The builder said it was. And they had already built and sold about 50 lots/houses in the subdivision with no previous issues, so they said. The title company held firm until the builder supplied some additional document.
I would want title insurance in case this had not been caught if it became an issue when I went to sell the house.
Montecfo
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it is essential.
Freedom56
Thinks s/he gets paid by the post
I believe title insurance is a scam with today's technology. Many other people have the same opinion. It's grossly overpriced given how easy it is to perform the records search.
https://www.forbes.com/forbes/2006/1113/148.html?sh=62aa860f5266
All those fools that refinance their homes keep paying for title insurance over and over again.
https://www.forbes.com/forbes/2006/1113/148.html?sh=62aa860f5266
All those fools that refinance their homes keep paying for title insurance over and over again.
Montecfo
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It may be overpriced but would you really not buy it?
If you have a mortgage you will have a lender's title policy but I assume you would pass on the owner's title policy, correct?
If you have a mortgage you will have a lender's title policy but I assume you would pass on the owner's title policy, correct?
CRLLS
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Even if all historical and current data was available for me to search and find, I would not invest hundreds of thousands of dollars in a piece of land with or without a home on it. You aren't paying for somebody to say everything is clear. You are paying for "insurance" that they did their job in searching past records and coverage for things that may be still an open issues and not been finalized or recorded yet . That is why it is called Title Insurance.
ExFlyBoy5
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This. Plus, depending on where the land is located, the records that are involved could get very complex very quickly.
Look at some of the issues in Oklahoma and a recent SCOTUS decision on tribal lands. So far, it has had very significant issues in criminal courts and while it may not affect land ownership rights, it is eye opening nonetheless. Title insurance is pretty cheap and I can't think of a scenario where I wouldn't purchase it.
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Freedom56
Thinks s/he gets paid by the post
Title insurance is a big scam. Banks require title insurance so your are forced to buy it if you are financing the transaction. Some states mandate that the seller pays the title insurance. If you choose to refinance in the future you have to pay for it again. Think about that for a moment... what changed between your first purchase and the refinance that would cause you to pay more money for title insurance? Wouldn't the first title insurance you paid for still apply? Most people don't understand what they are signing when they buy a property and escrow companies pad the transaction with fees whether the service was provided or not. When we bought our home in 1995, I was charged $75 for a FEDEX FEE even though we picked up the documents at the escrow company office. I asked the person what they sent to me by FEDEX, they then immediately removed the $75 from the closing costs. We were even charged $500 for a real estate agent fee on a new house where we didn't even use an agent. We went through the full itemized list of closing costs and found and eliminated $726 in fees charged for services never rendered that were eliminated from my closing costs. Most people don't look and their closing costs and these crooks get away with it.
As for our last real estate transaction in 2011 for our condo in Florida, I did not buy title insurance nor was I offered it or required to buy it since it was an all cash transaction. The rules vary according to the state and county. The seller was required to pay for title insurance ($1517.50) and new title search ($250) in our transaction in Palm Beach county. There are many documents already protecting the new buyer in Florida. Such as:
1- Owner's Affidavit
2- Affidavit for Disbursement
Had we financed the transaction (which was not even possible on a short sale back in 2011 as banks were only interested in all cash transactions), we would be hit with a multitude of fees amounting to thousands of dollars.
My advice to the OP is that research what fees are required by the buyer in the county where you are making the all cash transaction. After our experience with our home purchase in 1995 and the crooked escrow company, we did our homework before we reviewed the fees and signed the transaction documents. I would advise the OP to do the same.
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ExFlyBoy5
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Closing costs have to be provided to the buyer/seller prior to closing. All the costs involved are disclosed. They aren't crooks if you agree to it.
Here is some good information that lacks vitriol: https://www.consumerfinance.gov/owning-a-home/close/review-documents/
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Freedom56
Thinks s/he gets paid by the post
Closing costs have to be provided to the buyer/seller prior to closing. All the costs involved are disclosed. They aren't crooks if you agree to it.
Here is some good information that lacks vitriol: https://www.consumerfinance.gov/owning-a-home/close/review-documents/
I can assure you that in 2011 we were given one week notice that they were ready to close escrow. We booked our airline tickets and headed to Florida 48 hours before the signing and wired the balance owed to the escrow agent. The first time I saw my closing cost summary sheet was on the day they were ready for us to sign the documents at their office in Boca Raton Florida. Since it was an all cash transaction, there were very few opportunities to pad fees for services never received or rendered but they did so anyways. The real estate agent representing the seller tried to hit us with a $400 fee even though we were never represented by any agent on the transaction. They promptly removed the fee. Just because the CFPB has a new three day rule, it doesn't prevent the company managing the transaction to pad the closing costs with fees for services never rendered or even necessary. As I stated previously, most people don't even read what they are signing so the crooks can get away with. As for title insurance, it is a scam and the days are numbered for those few title insurance companies in this country.
ExFlyBoy5
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And again, if those buying/selling choose to NOT READ THE TERMS OF THE DEAL then there is no "crook".
Freedom56
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It's against the law to add fraudulent charges to closing costs. Disclosing the fraudulent charge does not indemnify title and escrow company. Just over 20 years ago the controller in California sued title escrow companies for doing just that.
https://www.joc.com/california-officials-sue-title-escrow-companies_19990527.html
https://www.alta.org/news/news.cfm?20021010-Title-cos-hand-back-50-million\
jazz4cash
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That’s harsh. We had such a bad experience that I decided I would pay as a seller to prevent a cash buyer from coming back at us which is what happened to a family member. I think the mortgage company believes title insurance provides some benefit.
The issue of paying over and over for a new policy is a different matter.
Montecfo
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I think you misunderstand that title insurance is term insurance. Also, you seem to misunderstand that it is "insurance" meaning it responds to claims of defects to title, even if unknown. You could be sued as a result of such claims.
It is not accurate to say that you are paying for the "same insurance" over and over again. Unless you look at auto insurance the same way, since it is also term insurance.
And of course the owner's policy is not needed to be purchased on a refinance.
I do wish it were cheaper. But I am not going to self-insure for what could be a catastrophic loss. And of course lenders will require what they require.
CRLLS
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If you buy title insurance, the coverage lasts for as long as you, or your heirs own the property. That is a one-time fee. Consider that the average length of home ownership is right around 8 years. That annual cost is less than the cost of homeowner's insurance against loss of peril. If you own the property longer than average, your annual costs go down, possibly way down. FWIW, we lived in our last house for 22 years. My current home, 16 years so far. While HI is a large part of the closing costs, it surely provides some value IMO.
Freedom56
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If you bought your home 29 years ago and never re-financed the title insurance is still in force. It is not term insurance where the policy is in force while you make payments. Lenders do require a new policy on refinance which is a total scam. The payout for title insurance claims is 3-4% which again confirms it is a scam. The state of Iowa did something about this scam by taking over title insurance issuance with a $110 flat fee for properties up to $500K. Per this article, Iowa has the lowest title insurance cost in the nation and also the most effective.
https://archive.curbed.com/2018/2/26/17017142/title-insurance-scam-government-takeover
Montecfo
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I think you misunderstand the word "term". It just refers to a period of time, which is the time that the financing is in force, for a lender's policy, or the period of time you own the house in the case of an owner's policy.
You seem to think a title search and a title policy are the same thing. They are not.
Title insurance must the repurchased when you have a new interested party that requires or desires (wisely I think) coverage.
Which makes perfect sense, whether you like the pricing or not.
But I think we have reached diminishing returns on the discussion.
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