Why is Title Insurance So Important?
When people are looking to purchase a home they think about the style of a house, the price, and the location of the house. Normally you never here them say anything about Title Insurance. When I bring up Title Insurance a look comes across their face like “what are you talking about”. What is Title Insurance? I explain to them that its basically a guarantee that they wont have financial or legal problems with the property as a result of what may have happened to the property before they purchased it. I explain to them that Title Insurance insures that there is no fraud with the property, or no liens against the property. You always want to make sure that the seller is who they say they are.
I am sure we have all heard terrible stories about people selling and renting property that does not belong to them. Also the Title Insurance will catch any errors missed during a title search.
The cost of Title Insurance is always a big concern to buyers. I explain to them; usually the real estate attorney request the report because they are the one responsible for viewing it. Sometimes buyers want to find their own title company to work with. However you decide to handle it just make sure it’s handled. The bank is going to make sure you take out Title Insurance because that is how they protect their interest.
I am sure we have all heard terrible stories about people selling and renting property that does not belong to them. Also the Title Insurance will catch any errors missed during a title search.
The cost of Title Insurance is always a big concern to buyers. I explain to them; usually the real estate attorney request the report because they are the one responsible for viewing it. Sometimes buyers want to find their own title company to work with. However you decide to handle it just make sure it’s handled. The bank is going to make sure you take out Title Insurance because that is how they protect their interest.
Comments (10)
Yes title insurance is one of the most profitable types of insurance. Therefore it is the worst when it comes to cost benefit for the buyer. I still buy title insurance whenever I can get it however, I have negotiated some very very good deals because the title was not insurable. I knew what the title issue was and felt it was a very small risk. This was a keeper, it it was a flip, I wouldn't have been ale to do the deal without tile insurance.
Ned Carey, almost 11 years ago
As somebody who works in insurance (I'm an actuary), I find it hard to believe that title insurance is worth the premium. Especially for high volume buyers. I found this on wikipedia (I know, the best source for true information ever!): "In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion taken in as premiums." That is disgusting. I work for a health insurance company that gets bashed daily for "huge profits". We're doing extremely well if we pay out 85% of our premiums. 4.3% is just insane! Based on my personal experience, it seems as though these companies typically charge around 2/10% of the purchase price (correct me if I'm wrong). That means that the likelihood of a claim of heirship or something else that would completely wipe out your ownership position is .002 * .043. About 1 in 12,000. Not all of the claims they pay will be for the full value of a home either. If you are an investor doing thousands of deals, it seems like you are just pissing money away with title insurance. That being said, I agree with Ryan H. if you are going to forgo the insurance, you should do some due diligence before buying a property. It might be worth it to find somebody in your area (or perhaps train an assistant) who would search public records for you for $50 or $100 per property.
Michael Seeker, over 12 years ago
Title insurance is a scam. A title company runs the title before closing and then YOU have to pay for title insurance to make sure that they did their job.
taylor, over 12 years ago
Title insurance is very important. There are many issues that can come up in a title search. Easements, encumbrances, liens and many other issues.
Account Closed, over 13 years ago
I'll say this much for title ins; the last 4 sub to deals I've put under contract have had liens against them that I otherwise would not have found. These amts were significant enough for me to either get out of the deal or change the strategy. It may be expensive but it's worth it.
Tom Bukacek, almost 14 years ago
Title insurance insures against items that may not be in county records - such as claims of heirship, etc.
Don Konipol, almost 14 years ago
Bryan, I agree it is a racket. You can pay the same premium on a refinance that you just paid only six months earlier. As a lender though it would be foolish to forego insurance especially on a distressed property and risk missing a lien or a release that was not recorded.
Ted Akers, almost 14 years ago
Title insurance is one of the largest rackets running right now...2nd only to Realtor commissions. Anyone with half a brain can check the records with the county. Having said that insurance is to indemnify you against catastrophic loss. Title insurance fits the bill well!
Bryan Hancock, almost 14 years ago
Good post. I fund the purchase for investors flipping properties and am amazed at the number of them wanting to not buy title insurance because they are flipping. As a lender I cannot see foregoing title insurance, even if you are to be in title for a very short period of time.
Ted Akers, about 14 years ago
Nice. True...not enough emphasis on title in a transaction. Should be just about the first element thought about or discussed every time.
Aaron Pfeffer, about 14 years ago