We just paid off our land note and asked the same bank to finance a new home. Why a title policy?

Question

As soon as we paid off our land note with the bank, we asked the bank to finance the building of our new home. I was shocked to see they are charging us for a title policy on a new home, on land they held the note on and we just paid off. The courthouse is all computerized and all you have to do is go there and find out in 2 minutes if they have been any liens on the land. Also, the attorney works as his own closer, so he splits the title policy with the title company 60 / 40. Why does a title policy cost so much when it gets pocketed by the title company and other closer? Would all banks require this title policy? It doesn't make sense but I know it is a ripoff. Anybody that works for the title insurance company, please justify these fees when you can go to most courthouses and look up these things in minutes. Why is it a well kept secret that if you pay tile insurance and sell within 7 years, you don't have to pay it all over again?

Answer 1

I don't mean to insult or hurt you. If I did, please forgive and excuse me.. A very basic question: IF you didn't need or want that money, you wouldn't ask for it, would you?

The bank or any reputable lender wants to protect their investment in your land to and through you. They want to make absolutely sure:
1] Someone else, representing and pretending to be you, represented they are and were the legal owner of your property. AND THEY got money they know darn right well they shouldn't have - leaving a lender AND quite possibly YOU "holding the bag". "Identity theft" is a very common occurrence these days, isn't it?
2] In the event they have to foreclose, they want to make absolutely certain they are the first in line by being the 1st Mortgagor or the first lien holder.
3] You, the Land Owner, didn't pledge that ground for a friend or relative who may have been in trouble with the law AND you, as Mr./Ms. Nice Person, put that land up as collateral - to make sure the person you are/were helping will appear before the Court on the appointed day and time.

Many, many times fraud is committed by one or more of the parties:
1] Lying - this is why an affidavit is prepared and notarized.
2] Pretending to be someone else who they absolutely know they aren't; ditto
3] and/or Actually forging names to documents.
and other reasons - probably too many to mention here [and no sense giving any unscrupulous people or anyone else any more ideas, is there?].

The lender wants to make sure you didn't sign for any other personal property or real property and put up the ground you own - free and clear - as additional collateral.

Its not a huge cost, is it? As a matter of fact, it’s a small price to pay for your own peace-of-mind, isn’t it? In many instances you may be able to incorporate that title insurance policy as part of your loan.

If you feel you're being ripped-off, you can shop the loan at other lending institutions:
A) to see what they have for fees and
B) how much those fees are &&&&
C) what ELSE they may require of you for that loan.

In Pennsylvania, where I live and practiced real estate, there is a "re-issue rate" for title insurance.
Perhaps your state or country has a similar situation for "re-fis" [re-financed properties] and construction loans.

Its worth looking in to, isn't it?

I wish you well.
Our Family Slogan: "Every Good Wish to You and Yours!" I wish you, your family and your friends nothing but the absolute best of everything life has to offer.

Very Truly Yours,
Ron Berue

Answer 2

there are other things besides liens that have to be searched for. The title search also looks for special assesments, any unfinished paperwork (such as from when you bought the property) etc etc. Believe it or not there are transactions that go through only to find out later something wasnt signed etc. So by buying the title insurance you are insured against anything that could have gone wrong or been missed. Its to protect YOU. If you keep your title policy and dont lose it and you sell or refinance within a few years you can get a very big discount on the new policy.

Answer 3

A title policy is required EVERY time you refinance, even if it is the same lender with the same piece of property. The title insurance is there to protect you, as well as the lender, from any inequalities or clouds on the title. The title firm has no idea if something untoward has come up between the first title policy and the refinance time, so they require a re-issue.

Answer 4

Simple: they want a guarantee that there are no liens/trusts/mortgages that will be higher in priority than their own. The title insurance company charges for the insurance to protect the bank for as long as it has the loan. These insurance fees are regulated by your state insurance commission--you can check to verify that yours are ok. I understand how you feel, but title insurance is one of those essential steps a bank has to take and it might be required by the regulators or investors.

Answer 5

If you are looking for a construction loan I can help you get it

shot me an e-mail.... I have great options without you paying for as long as 12 months or your construction term.

That means savings, a lot of savings.

shot me an e-mail

[e-mail]

Answer 6

at home on P&S. I have more freedom to laugh and run into shopping carts. Edit: Yes, even if I only have dial up. Dial up is way too fast for me.