Do I need title insurance?
New to Real Estate · Iselin, NJ · Member since 2022 · 70 posts · 22 votes
Do I need title insurance?
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Quote from @William Anderson:
If you are going to hold for 30 years and sell before the property is paid off then you do not need owner's title insurance. You will be covered by the lender's policy while the mortgage is in place.
If you intend to pay it off soon and retain the property then it's a gamble if you should have it or not. Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.
You can not keep the VA guarantee to a third party or second buyer.
I went to the house and knocked on the door. The owner opened it and I explained that he was living in my house. He was shocked. I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.
The next day the title insurance company representative met me and gave me a copy of the stamped reconveyance. Had this not been taken care of, I would have taken the house. Since I am a nice guy, the buyer was able to keep it.
Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem. The same problem you could have if the lender is paid off and you are without a policy. Just FYI.
But to suggest that owners coverage is unnecessary when there is a lenders policy in effect is bad advice. I can think of many situations where a lender’s insured lien would be unaffected while an owner’s interest requires legal action to defend. Guess who pays legal when owners coverage is declined.
Lenders and owners policies cover different risks.
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18 Replies
- Investor · Cleveland · Member since 2021 · 247 posts · 240 votes3y
I would advise getting title insurance. It's typically a small, one time payment and it's worth it to know that you'll be covered against any title issues down the line.
Title issues can cause major problems and they're virtually unpredictable.
- Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes3y
If you are going to hold for 30 years and sell before the property is paid off then you do not need owner's title insurance. You will be covered by the lender's policy while the mortgage is in place.
If you intend to pay it off soon and retain the property then it's a gamble if you should have it or not. Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.
You can not keep the VA guarantee to a third party or second buyer.
I went to the house and knocked on the door. The owner opened it and I explained that he was living in my house. He was shocked. I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.
The next day the title insurance company representative met me and gave me a copy of the stamped reconveyance. Had this not been taken care of, I would have taken the house. Since I am a nice guy, the buyer was able to keep it.
Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem. The same problem you could have if the lender is paid off and you are without a policy. Just FYI.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Ben Firstenberg:
I would advise getting title insurance. It's typically a small, one time payment and it's worth it to know that you'll be covered against any title issues down the line.
Title issues can cause major problems and they're virtually unpredictable.
Title insurance does not cover all title issues, there are exclusions and exceptions to coverage written in the policy. There may also be title issues that are not covered by the insuring provisions of the policy so a resulting loss probably would not be covered. Even so, I strongly recommend purchasing a title policy when purchasing most real estate. but please, read and understand the policy commitment before closing. Nothing can spoil your day more than having a neighbor tell you they have an easement over your property and finding an exception for the easement in your policy.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @William Anderson:
If you are going to hold for 30 years and sell before the property is paid off then you do not need owner's title insurance. You will be covered by the lender's policy while the mortgage is in place.
If you intend to pay it off soon and retain the property then it's a gamble if you should have it or not. Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.
You can not keep the VA guarantee to a third party or second buyer.
I went to the house and knocked on the door. The owner opened it and I explained that he was living in my house. He was shocked. I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.
The next day the title insurance company representative met me and gave me a copy of the stamped reconveyance. Had this not been taken care of, I would have taken the house. Since I am a nice guy, the buyer was able to keep it.
Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem. The same problem you could have if the lender is paid off and you are without a policy. Just FYI.
Why does the length of time you own the property have anything to do with the need for title insurance?
A lender's policy provides NO coverage to a non-insured, be they an owner/borrower, subsequent purchaser or a random guy walking down the street.
It sounds like the settlement agent had obtained the recon and had just failed to record it; title insurance had nothing to do with it, but why do you believe that had a recon not been obtain you would have had title to the property since you had already conveyed it?
- Can the existence of a lenders policy help resolve a title defect in favor of the owner? Sure, it happens.
Quote from @William Anderson:
If you are going to hold for 30 years and sell before the property is paid off then you do not need owner's title insurance. You will be covered by the lender's policy while the mortgage is in place.
If you intend to pay it off soon and retain the property then it's a gamble if you should have it or not. Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.
You can not keep the VA guarantee to a third party or second buyer.
I went to the house and knocked on the door. The owner opened it and I explained that he was living in my house. He was shocked. I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.
The next day the title insurance company representative met me and gave me a copy of the stamped reconveyance. Had this not been taken care of, I would have taken the house. Since I am a nice guy, the buyer was able to keep it.
Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem. The same problem you could have if the lender is paid off and you are without a policy. Just FYI.
But to suggest that owners coverage is unnecessary when there is a lenders policy in effect is bad advice. I can think of many situations where a lender’s insured lien would be unaffected while an owner’s interest requires legal action to defend. Guess who pays legal when owners coverage is declined.
Lenders and owners policies cover different risks.Gimer Law516 Reviews Quote from @Hemal Adani:
Hello, I have mortgage on a property. Lender has ordered and received lender's title insurance. Do I owner's title insurance as well? Should I get one after mortgage is paid off?
OF COURSE!!!!
- Member since 2018 · 1k+ posts · 1k+ votes3yWhich is the whole point of title insurance -- you have the issue flagged as an exception and deal with it prior to closing and taking title. It also tells you what generalities it won't cover (something not of record but observable by inspection), so you will observe and ask questions and get things fixed prior to closing.
Quote from @Peter Walther:
Title insurance does not cover all title issues, . . . Nothing can spoil your day more than having a neighbor tell you they have an easement over your property and finding an exception for the easement in your policy.
Ninety percent of the value of title insurance is that it forces (if you're smart) disclosure and awareness, thereby preventing claims in the first place.
As for owner's policies in general, one should have them. They protect the buyer's equity. - Member since 2018 · 1k+ posts · 1k+ votes3y
Quote from @William Anderson:
Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.
I went to the house and knocked on the door. The owner opened it and I explained that he was living in my house. He was shocked. I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.
Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem.
I would have laughed in your face. Once title was conveyed, you had no interest in the property. Even if you had an assumable VA mortgage and the buyer assumed (you are still on the hook for the assumed mortgage, even if the new guy is paying the mortgage), you would have had at best an equitable lien in the property after you paid the assumed mortgage, which you would then have to prove and foreclose on. Since you were never out of pocket on the assumed mortgage (if it was assumed) after there was an assumption, you had no interest and therefore no claim. It wasn't "your" house by any stretch of the imagination.
Homeowners should get title insurance to protect their equity. If title is lost, the insurer would pay the mortgage balance using the bank's policy, but that doesn't give the homeowner anything -- he lost his equity, including his initial equity. Homeowner's title policy protects his initial equity, and if there are booster clauses in the homeowner's policy, some of the appreciation as well. - Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @John Clark:
Which is the whole point of title insurance -- you have the issue flagged as an exception and deal with it prior to closing and taking title. It also tells you what generalities it won't cover (something not of record but observable by inspection), so you will observe and ask questions and get things fixed prior to closing.Quote from @Peter Walther:
Title insurance does not cover all title issues, . . . Nothing can spoil your day more than having a neighbor tell you they have an easement over your property and finding an exception for the easement in your policy.
Ninety percent of the value of title insurance is that it forces (if you're smart) disclosure and awareness, thereby preventing claims in the first place.
As for owner's policies in general, one should have them. They protect the buyer's equity.I think you give way too much credit to the average buyer. I suspect it's more likely the buyer read the homeowner's policy then the title commitment.
- Real Estate Agent · Roswell, GA · Member since 2023 · 19 posts · 13 votes3y
Yes, you should protect your assets, you don't want to run into a situation where someone is claiming title to your property. This happened to me! An LLC formation was claiming there was a break in the title and that the property should revert back to the. Fortunately, I had title insurance (if it wasn't for my title company to resolve the issue quickly. I'm not sure how costly it would be to fight the issue in court. Title insurance is for your protection!
- Member since 2018 · 1k+ posts · 1k+ votes3y
Quote from @Peter Walther:
I think you give way too much credit to the average buyer. I suspect it's more likely the buyer read the homeowner's policy then the title commitment.
The average buyer uses a lawyer, and the lawyer looks at the title commitment and starts asking questions, including of his client ("What did you see at the premises?"). Then the lawyer counsels his client, who in turn decides what risks he wants to take. The lawyer can also make sure that funds are withheld at closing to pay to remove defects in title that can be removed with money.
So sure, the buyer reads the policy after the fact, but the title commitment is read by his agent, the lawyer.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @John Clark:
Quote from @Peter Walther:
I think you give way too much credit to the average buyer. I suspect it's more likely the buyer read the homeowner's policy then the title commitment.
The average buyer uses a lawyer, and the lawyer looks at the title commitment and starts asking questions, including of his client ("What did you see at the premises?"). Then the lawyer counsels his client, who in turn decides what risks he wants to take. The lawyer can also make sure that funds are withheld at closing to pay to remove defects in title that can be removed with money.
So sure, the buyer reads the policy after the fact, but the title commitment is read by his agent, the lawyer.
Use of a lawyer depends a great deal on the location of the property. It's fairly common in NC but rare in FL. Even when an attorney is involved there's no guarantee the client/buyer is going to pay attention as they're in a hurry to close.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes3y
Just had a title problem come up on a property I sold 3 years ago. The title defect traced to 1980 with an extra persons name on a deed that wasnt supposed to be on it.
Had another title defect on another property last month. Title defect traced to 1998. 2 sellers, only 1 signature on the deed.
District Invest Group545 Reviews - Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes3y
Ive dealt with multiple title issues this month. On one property the defect dated to 1980 and was discovered thia month, 3 years after the last sale. On another one it dated to 1996 on a transaction we were in the middle of.
District Invest Group545 Reviews - Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes3y
If you think the way to wealth in real estate is by cutting corners to save pennies then no you do not need title insurance.
Im sorry if this comes accross as snarky but I have read so many threads tonight about people wanting to cut corners to save money. That is not where the wealth comes from in this business
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes3y
@Tom Gimer wrote
But to suggest that owners coverage is unnecessary when there is a lenders policy in effect is bad advice.
Thank you Tom. People be careful who you listen to here. I see a lot of questioable advice. - Detroit, MI · Member since 2020 · 150 posts · 68 votes3y
Yes - you absolutely should have an Owners Title Insurance Policy.
Generally speaking at least in Michigan you the buyer are providing the Lenders Title Insurance Policy to the Lender, meaning you are paying the Settlement Agency for that policy, the Sellers of the home you are purchasing should be providing/paying for the Owners Title Insurance Policy that insures you as the Buyer.
I strongly asking for a copy of the Owners Title Commitment to review all the exceptions and exclusions.You do not need to purchase another policy after the mortgage is paid off. The Owners Policy is good throughout the time you own the home. When you sell, you will provide the new buyers with an Owners Policy insuring them.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes3yIf you get it, you wont need it. If you skip it, youll need it.
Quote from @Hemal Adani:
Hello, I have mortgage on a property. Lender has ordered and received lender's title insurance. Do I owner's title insurance as well? Should I get one after mortgage is paid off?
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