How can I know whether to purchase title insurance for a home purchase? Apparently, title insurance covers the financial loss due to an unforseen legal claim against your right to ownership (such as an unrealized inheritance from a previous owner, unidentified liens, etc.). In most cases, title insurance for the lender is mandatory, but that just covers the lender. I am told that owner's title coverage will cost us around $400. That seems like a lot of money for an extremely small risk and is cash that can be used for dozens of other needed repairs. My real estate agent says that he has never purchased it for himself and that some people get it and others don't.
What would be a good basis for purchasing title insurance, and under what "safe" circumstances might it be considered flushing money away?
2007-07-13 05:11:47 · 7 answers · asked by fluvial_shell 2 in Business & Finance ➔ Renting & Real Estate
If you are smart you will, and some states require it.
This will only come up with the title company. You are paying for a title company to research the address for possible "clouds" on the title. If they fail to do their job appropriately and you don't have insurance to cover this, you could lose all of your investment and then some. For the security, $400 is a cheap price.
You can't buy title insurance after you have already taken possession of the property.
2007-07-13 05:16:34 · answer #1 · answered by MIKE M 3 · 0⤊ 0⤋
I'd start shopping for a different title company. Depending on what state you are in, that spread seems very high.
Title insurance costs, except for FL and maybe a couple other states, can vary dramatically. By several hundred bucks in total, potentially.
I'm genuinely surprised your realtor told you not to bother. Most agents are so afraid that if they tell you no, then something happens later, you'll sue them. So 99% always encourage it as a matter of policy. I do the same, but for different reasons.
If anything were ever to happen to screw up your title, $400 is less than 2 hours time with any decent attorney. The cost of litigation could be $10K or more.
Like all insurance, much of it is money wasted. You still insure you car though, don't you? When's the last time your health care costs actually exceeded your premiums paid for the year? Doesn't happen too often. But God help you if you're uninsured and get in a car wreck and don't have health insurance and you hurt someone else too. You'll be out $100K or more, vs. having simply paid a couple grand a year to protect yourself.
You have no way of knowing if the last seller didn't pay off his ex-wife properly. Or if they had work done to the home by a contractor but didn't pay for it. Or maybe there was a probate issue and some grand-nephew thinks he got screwed out of his inheritance. Who knows? Not you. And the title company can miss stuff when they do their title searches. I've seen mortgages recorded on the wrong properties numerous times. I've seen people sell their home, pay off their home equity line of credit, then spend against it before it gets paid off at the bank, causing the lien to remain open against their old home.
In fact, I'd ask your lender or realtor to shop some title companies for you. You can do it yourself too, it's not hard really. All you need to know is your purchase price and loan amount (assuming you are financing some portion?) to get a quote from them. They'll all gladly whip up a sample HUD-1 settlement statement for you (just like a good-faith estimate).
If you are paying cash for the home, you'd be nuts not to buy the policy though. It sounds like you're only concerned about the cost spread between the owner's and lender's coverage though, so in this case, just shop around. And consider buying it. Keep in mind, lender's policies get renewed when you refi, but an owner's policy remains in force as long as you own the property, only purchased once.
2007-07-13 08:35:51 · answer #2 · answered by Yanswersmonitorsarenazis 5 · 0⤊ 0⤋
Title insurance covers YOU, not the lender. However, all lenders will require it before they will agree to underwrite your mortgage.
The lender will be named on the policy as the lienholder to your policy. Lenders require this insurance because, even though title clouds are rare, they DO occur. The lender will want this insurance in place to protect their collateral in the event that an issue DOES arise.
$400 is not a great amount to pay for the security of knowing your title to your property is covered thusly.
2007-07-13 06:25:42 · answer #3 · answered by acermill 7 · 0⤊ 0⤋
I know someone who bought the house cash and didn't get title insurance protection only later to find out that there wasn't a proper title transfer and they lost the house along with their down payment. It's a small price for such a large investment.
CA Lender
2007-07-13 20:11:25 · answer #4 · answered by lenderjayne 3 · 0⤊ 0⤋
the fee is set as a proportion of the acquisition fee of the residing house. It varies, yet by making use of STATE or COUNTY, not by making use of broking provider. So, case in point, in case you purchase your place in Allegheny County, PA, you will pay 3% of the acquisition fee for identify coverage, no count whom you purchase it from. it rather is why no person bothers to save around. maximum %brokers do not furnish identify coverage, it rather is quite terrific.
2016-12-14 07:43:33 · answer #5 · answered by okamura 4 · 0⤊ 0⤋
$400 bucks is really steep for that little of risk. I vote no.
2007-07-13 05:16:30 · answer #6 · answered by Ryan J 2 · 0⤊ 0⤋
find out exactly what it would cost...it is a good thing to have.
2007-07-13 05:16:30 · answer #7 · answered by Anonymous · 0⤊ 0⤋