Often overlooked, owners title insurance is absolutely essential when buying a home.
What do these things have in common, and should they matter?
- The builder from whom you just bought a house filed bankruptcy shortly after you closed on it. At least one of his subcontractors did not get paid for the work they did on the house.
- Decades ago, a corporation sold land on which a condominium complex was later built. The person who signed for the corporation at the sale was an officer of the corporation, though they did not file anything with the parish stating this. Many of the condominiums were bought and sold over the years, and now you’re purchasing one.
- Back in the 1940′s, a piece of land was handed down to the heirs of the owner, who passed away. That succession was not filed with the parish. You are now buying a portion of that land.
- The owner of a house donated half of his ownership to his wife, from whom he later divorced. Years later, the house was put on the market, and you now have it under contract.
The answers are that ALL of these are title issues which actually happened to clients of ours, and they VERY much mattered! Some of them were discovered by excellent title work from our closing attorney, and were able to be corrected. Some were not correctable, and caused the sale to fall through! Most of these SHOULD have been discovered long ago, but were not, while others were the result of newer events which there was no way to predict.
These types of issues, and many more, all greatly affect the title to the property you are trying to purchase. They can put a complete stop to the sale, which costs you time and money; they can cost you time and money while having to correct them yourself; or worst of all, can threaten your very ownership of the property after you buy it. Click here to see a list of potential problems which can affect title to a property.
Lenders realize that title problems can be severe, which is why they REQUIRE a lenders title policy be in place when you finance a purchase. If a title problem threatens the property, that policy covers the lender ONLY, not you!
Suppose for example you bought a house for $250K, putting down 20% ($50K) and financing the remaining $200K. Let’s say that a catastrophic title defect is discovered after the sale, one which invalidates the sale and returns the property to the former owner. (This is rare, but it CAN happen!) The lenders title policy covers their $200K, but without an owners policy, you are by yourself with regard to getting your $50K back. Chances are you’d have to hire an attorney and fight it out in court. IF you got your money back, it could take a very long time, and the legal fees might well eat up much of it anyway.
We believe that owners title insurance, like flood insurance, is something EVERY purchaser should insist upon when they buy real estate. The cost of an owners title policy is a onetime expense paid at closing, and covers you as long as you own the property. Most providers have basic coverage and an extended plan which costs only a little more, but gives you MUCH more in terms of coverage. ALWAYS GO WITH THE EXTENDED PLAN!
With an owners title policy, you have guaranteed legal representation should you ever have to defend your title through litigation. Also, your financial interests are covered. (Disclaimer: Policies will vary among different companies and coverage levels.)
Some real estate agents, loan officers, and even friends and family will sometimes (foolishly) advise you not to get title insurance. They’ll say things like “Come on, it’s in a subdivision, so these titles have already been thoroughly researched!” This does not matter. The condominium we mentioned above had had dozens of sales, spanning years, yet NOT ONE of the title attorneys on all those prior closings caught the fact that the original land sale was not valid!
If anyone advises you to omit title insurance, ask them if THEY will personally guarantee that every past sale, succession, resubdivision, etc. was properly executed and recorded; that NOBODY throughout the decades made any mistakes, or committed fraud; and if you do end up with a title problem, that THEY will cover every bit of your losses out of their own pocket. We strongly doubt they will say yes!
In summary, an owners title policy is one of the best forms of protection you can have for a property you own. Like flood insurance, chances are you won’t need it, but if you do, its benefits incredibly outweigh its cost.
Feel free to call or email us if you’d like to know more about this often overlooked coverage.
Note: We do not get any sort of referral fee or other benefit for recommending any outside product, person, or service. Not only is that illegal, it just wouldn’t be right. We make recommendations only for things we believe in, and which will best serve our clients.