Ask the Pack: Owners title insurance

[FreeDawg]

Yay or nay?

Was told that it's not exactly necessary on new construction or only 1 previous owner. After some research it appears it's more important in older houses that have been resold numerous time or had weird circumstances like foreclosures or passed along it wills. I understand that it completely protects you and gives you peace of mind but It was explained to me if it's new that as long as the title search comes in clean, you're good to go. The question is to hold on to half a g or hand it over for peace of mind?

 

[AlCoDog]

Yay or nay?

Was told that it's not exactly necessary on new construction or only 1 previous owner. After some research it appears it's more important in older houses that have been resold numerous time or had weird circumstances like foreclosures or passed along it wills. I understand that it completely protects you and gives you peace of mind but It was explained to me if it's new that as long as the title search comes in clean, you're good to go. The question is to hold on to half a g or hand it over for peace of mind?

If the property is in a subdivision, you're probably ok without it, but there could still be scenarios you may need it. Plenty of attorneys and mortgage folks on here that can give you a more specific answer.

 

[patdog]

General rule is if the title insurance company is willing to issue the policy, the title is clear. You really are paying $500 for peace of mind.

 

[Wooly17er]

More important: Lawn Insurance. Hashtag Molecrickets.

 

[Lawdawg.sixpack]

Your mortgagor will surely require it. And if you're paying for it yourself, then you can probably afford the extra $500.

 

[karlchilders.sixpack]

Insurance is good

truth is, the most important thing, is WHO checks title for you.

The right attorney will be meticulous, on the front end.

 

[Shmuley]

If the legal is a lot and block, decline. FYI, 70% of the quoted premium (for both the lender title policy and any owner's title policy that is issued) is remitted to the title insurance agent (the closing attorney).

 

[patdog]

He's asking about owner's title insurance. The mortgagor will require him to pay for their title insurance. But that only pays them the balance on the mortgage and he'd lose the equity he had in the house. Owner's title is optional and pays the full fair market value of the property. It's a waste of money, because if there's a problem with the title, the insurance company won't issue the mortgagor policy and the sale won't go through. Former MSU football player Steve Younger was the closing attorney when I bought my first house (from Mike Kinneson when he left Prep to take the assistant coaching job under Boo Ferris at Delta St). I asked him about the owner's title policy. He told me it would be a complete waste of money, and he'd get most of the premium as a commission.

 

[ronpolk]

He's asking about owner's title insurance. The mortgagor will require him to pay for their title insurance. But that only pays them the balance on the mortgage and he'd lose the equity he had in the house. Owner's title is optional and pays the full fair market value of the property. It's a waste of money, because if there's a problem with the title, the insurance company won't issue the mortgagor policy and the sale won't go through. Former MSU football player Steve Younger was the closing attorney when I bought my first house (from Mike Kinneson when he left Prep to take the assistant coaching job under Boo Ferris at Delta St). I asked him about the owner's title policy. He told me it would be a complete waste of money, and he'd get most of the premium as a commission.

Agree with this. If there is a problem with title, they won't offer you title insurance. One thing to worry about with new construction is making sure no subs or vendor put a lien on the property. You'd be shocked by how many builders will stiff somebody.

 

[Philly Dawg]

Definitely get it no matter how many prior owners and whether or not it's in a subdivision. It's very unlikely you will ever have an issue, but if you do it could be a very major problem and you'll be very glad you have it. And there are some problems that are covered and wouldn't necessarily show up on a title search.

 

[Maroonbulldog]

Yay or nay?

Was told that it's not exactly necessary on new construction or only 1 previous owner. After some research it appears it's more important in older houses that have been resold numerous time or had weird circumstances like foreclosures or passed along it wills. I understand that it completely protects you and gives you peace of mind but It was explained to me if it's new that as long as the title search comes in clean, you're good to go. The question is to hold on to half a g or hand it over for peace of mind?

I recommend the Optional owners insurance in a few situations
1. You are putting a lot of money down
2. Foreclosure
3. Family estate w family fighting over money
4. Peace of mind

originators are REQUIRED to offer owners title on all purchases.

Lenders title is required and is usually a charge of $3/$1000 borrowed. It protects your balance in case of a bad title.

Owners title covers your purchase price.



I will will write more details on my Facebook page "The Mortgage Guru" later today if you want to know more details.

 

[Maroonbulldog]

Yay or nay?

Was told that it's not exactly necessary on new construction or only 1 previous owner. After some research it appears it's more important in older houses that have been resold numerous time or had weird circumstances like foreclosures or passed along it wills. I understand that it completely protects you and gives you peace of mind but It was explained to me if it's new that as long as the title search comes in clean, you're good to go. The question is to hold on to half a g or hand it over for peace of mind?

I recommend the Optional owners insurance in a few situations
1. You are putting a lot of money down
2. Foreclosure
3. Family estate w family fighting over money
4. Peace of mind

originators are REQUIRED to offer owners title on all purchases.

Lenders title is required and is usually a charge of $3/$1000 borrowed. It protects your balance in case of a bad title.

Owners title covers your purchase price.



I will will write more details on my Facebook page "The Mortgage Guru" later today if you want to know more details.

 

[Dog.sixpack]

Yes you should get it. If you are getting a mortgage, the bank requires you to get the lenders policy. So you can get an owners policy added to cover you for just a little bit more. They don't double the amount of the lenders policy, I don't think. And it'll cover you when "crazy" happens too. Like when the mortgage on your property from a previous owner doesn't get paid off, when the closing attorney doesn't do something right with your deed, when the closing attorney takes the closing cash to Vegas, etc.

 

[johnson86-1]

truth is, the most important thing, is WHO checks title for you.

The right attorney will be meticulous, on the front end.

A lot of people are giving too much credit to the closing attorney. Most will do a good job because most title insurer's build their business model around basically no liability. But there are attorneys that go a good while doing subpar title work (or more likely their abstractor doing subpar work) and when they finally have an issue, the title insurance company no longer lets them right policies for them. People that use those attorneys will be glad that they have an owners policy.

Still a very unlikely risk and it's very expensive to insure against it, but it's not zero risk.

 

[karlchilders.sixpack]

My comments come from a lifetime of experience. Not just buying a house.

 

[johnson86-1]

My comments come from a lifetime of experience. Not just buying a house.

Not sure if it reads that way, but I was actually agreeing with you. If you have someone do it that is diligent and competent, there's not much risk. I was trying to point out that the people saying "if the title company will write it, there is no risk" are overselling that a bit. That's the way the title insurance companies generally want to do business, but once an attorney gets approved to write insurance for them, they can start playing fast and loose and do a lot of closings before it catches up to them.

 

[00dog]

Roughly 25 years ago I bought a house in Tippah County. The following year I was hit with a bill for property taxes that the previous owner had failed to pay. Now, I had purchased title insurance. I asked my closing attorney if the title insurance would cover, but he said no. I called the title insurance company (can't remember the name) in Jackson. Told the guy the problem and he said that, yes, the title insurance would cover it (once he verified it), that that was one of the reasons you buy the insurance. Super nice guy. I had the check in hand in a flash. The check was about the same as the cost of the policy, but it was still comforting to have the protection. I think the insurance would also protect you in the event that someone had lien on the property for something like construction cost (materials, labor, etc.). I've purchased a couple of other homes, and the title insurance, but have not again used the insurance. Bottom line, I've paid more for the insurance than I've received in claims, but considering the investment, weighing the likelihood that something might/could occur, and having one of those unlikely events (property taxes not paid) happen to me, I opt for the insurance.

 

[UpTheMiddlex3Punt]

Rule #1 of insurance: if you assess whether or not to purchase it based on expected return, you'd never purchase it. Companies have to make money.

Should you purchase it? Absolutely. If there is no claim filed, you're out $500. If there is a problem with title and you don't have insurance, you could be out tens of thousands (or maybe more).

 

[HunterDawg]

Most problems are pretty minor. Small encroachments or small undiscovered liens. Total loss of the property is extremely rare.

What are the chances that a claim will exceed the amount of your loan? Unless you make a substantial down payment, the lender's coverage will be almost as much as the value of the house.

If the claim is that big, the closing attorney clearly screwed up and will ultimately be responsible. Sue him.

 

[Philly Dawg]

Some comments from someone with direct experience in the field: (1) you are correct that the likelihood of a problem is very small, especially if the loan is closed by a quality attorney, (2) big liens (i.e. tens of thousands or more) are just as common or more common than small liens, (3) you are correct that you can sometimes piggy-back on the lender's coverage but it actually provides no direct coverage to the owner (no defense, see below) and it does not last beyond the repayment of the loan, and (4) there are many attorneys in Mississippi that do not have malpractice coverage and even if they did, you'd much rather be the insured under a title policy than a plaintiff in a lawsuit. Keep in mind that a title policy will provide you a defense, i.e. provide you a lawyer, if you are brought into a lawsuit that falls within its coverage.

 

[HunterDawg]

I doubt there are many, if any, title insurance agents without malpractice coverage. It is a very strict requirement of every title company I have ever encountered. In fact, they require that the attorney furnish a copy of the entire policy annually and dictate the limits, usually at least a million and the deductible. If they have to pay a claim, they can, and often do, make a claim on the closing attorney's coverage to get their money back.

Missed liens will be superior to the lender's Deed of Trust. The bigger they are the more pressure is on the lender to resolve them. If they had to foreclose, the lien would still be on the house and they would then have to pay it. They will not tolerate that. Neither will the FDIC.

I don't dislike Owner's coverage, I just think it is, unless there are unusual circumstances, pretty expensive for little benefit. There are now super owner's policies out there that even guarantee the dishwasher won't break. Home warranty kind of policies. To each his own.

 

[Philly Dawg]

I probably oversimplified that comment somewhat. Attorneys who are currently agents for a title insurance company will have malpractice insurance, but attorneys who are no longer agents may no longer maintain their insurance and they may have had a "claims made" policy, that is, a policy that only covers claims made during the policy period. A large portion of claims originate from a few bad agents who are generally out of business before most of the issues are discovered.

The real question is whether you'd prefer to hire your own attorney out of pocket to sue the closing attorney, or make a claim on your own policy of insurance and have the title insurance company hire a lawyer to cure the defect.