Tag Archives: Title insurance

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

Getting the right agent is crucial when putting your home on the market.

When you hire an agent to sell your home, you spend quite a bit of money at closing, but what are you actually paying for? It really depends on who you hire and how they perform their duties. Unfortunately, many sellers end up hiring what we refer to as “real estate secretaries” – someone who enters the listing into the MLS, puts up their sign, (maybe) answers calls, fills out a contract, and shows up at closing to get their check. When sellers see bare-minimum service like this, they ask “Why am I paying them thousands of dollars to do so little?” and they are right to question this.

Being well represented as a seller goes beyond not just getting your value out of your listing commission in the form of great marketing, communication, and follow-up. The process of selling a property involves multiple parties, legally binding contracts, and many complex steps before closing, so it must be executed diligently, to avoid the risk of large expenses and even lawsuits. It is your agent’s knowledge, advice, guidance, and experience (or lack thereof) which will make the difference here. This is where the value is found in information that you can’t just get from Google and wing it. A seasoned, thorough, detail-oriented agent will have those skills, which prove to be priceless in many situations.

While these concepts all sound good, let’s look at a real life example which came up very recently. The seller of a property had some previous title work done with a title company and was under the impression that if the buyer used their title company, then the seller would save significant closing fees. So, the seller told the listing agent to mandate that the buyer must close with their title company. First of all, the seller was mistaken about the closing costs, since most closing costs are the buyer’s responsibility and a seller’s fees typically only run $250-$500 at closing, and often less. Far more important however was the fact that by mandating the closing company, the seller (and agent) were actually violating the Real Estate Settlement and Procedures Act (RESPA), a federal law that governs the sale and purchase of residential property. This law “prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.” (Reference: HUD RESPA Section 9) Violating this section of RESPA allows a buyer to sue the seller for up to 3 times the amount of the title insurance, so with a typical title insurance cost of $800-$1200, the liability to the seller is $2400-$3600 (probably in addition to attorney fees etc), all to try to save at most $500.

Not only was I concerned about putting everyone in the transaction in a position to be sued if something were to go wrong with the title, but I also wanted to have a different set of eyes on the title work to be sure that it all gets processed correctly. I emailed my concerns to the listing agent, citing the federal law and the liability vs. potential benefit for the sellers, and the sellers decided that it, indeed, was in their best interest to not push this issue with my buyer. All of this happened in the background without upsetting my buyer and causing them unnecessary stress.

“Real estate secretaries” will not anticipate issues such as this one, and often lead the seller into dangerous territory, where expensive litigation or other financial losses could result. So, when you interview and choose a listing agent, keep in mind that the discount commission charged by an inexperienced agent or one who rushes through everything very superficially can ultimately cost you far more than an agent who has the experience, knowledge, and skills to keep you out of trouble and to maximize your profits at closing.

Owners title insurance

Owners title insurance: Don’t buy a home without it!

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.