Ft. Worth, TX · Member since 2008 · 97 posts · 16 votes
Believe it or not, I'm actually considering this.
My father-in-law owns a house he is interested in selling that I think would make an excellent rental property.
He's owned the property for 10 years.
According to county records, this piece of property has had only 2 prior owners: my father-in-law's father, and HIS father.
It's hard to imagine a more risk-free property to buy w/o title insurance. Title insurance in Texas is quite expensive. I'm debating whether or not I might want to save $700 by not getting this insurance.
So, knowing this will spark a healthy and educational debate... what do y'all think? :D
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
18y
Having a cloud or having a "break" on the chain of title definitely makes it extremely difficult to sell a property, but not not getting title insurance on a property when you buy it doesn't necessarily mean you will have any title problems.
When a title company issues title insurance they will do a title search on the property to make sure that the title is clear. The title insurance is merely an insurance policy against any clouds in the title that the title company may have missed when they did their search.
Either way title insurance will insure that you have clear title, but not getting title insurance doesn't mean you have bad title. It just means you don't have insurance guaranteeing good title.
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
18y
I would at least have a title company run a title search for you. It usually runs about $50. It will tell who is in title and what liens/encumbrances are showing on it. It won't provide any insurance of title but it'll give you a good idea that everything is clear.
Ft. Worth, TX · Member since 2008 · 97 posts · 16 votes
18y
Originally posted by "Ryan_Webber":
I would at least have a title company run a title search for you. It usually runs about $50. It will tell who is in title and what liens/encumbrances are showing on it. It won't provide any insurance of title but it'll give you a good idea that everything is clear.
Yes, that would definitely be in the plan. Good point.
Real Estate Investor · East Lyme, CT · Member since 2008 · 78 posts · 10 votes
18y
Originally posted by "NogginBoink":
It's hard to imagine a more risk-free property to buy w/o title insurance. Title insurance in Texas is quite expensive. I'm debating whether or not I might want to save $700 by not getting this insurance.
It hard to imagine it not being worth $700? How much is the house worth and selling for?
Just my 2 cents
Real Estate Consultant · Las Vegas, NV · Member since 2008 · 23 posts · 0 votes
18y
You may want to check with an attorney on that one. I have been told that once you break the chain of title the title will become unmarketable which means that you may have a problem selling it. I don't know this to be true but it would probably be in your best interest to check it out.
Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
18y
Originally posted by "Bubba":
I have been told that once you break the chain of title the title will become unmarketable which means that you may have a problem selling it.
How would he be breaking the chain of title?
Title insurance is optional. It is certainly one of the least expensive forms of insurance because the risk to the insurer is extremely low. I still wouldn’t want to be without it to save a few dollars.
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
18y
Having a cloud or having a "break" on the chain of title definitely makes it extremely difficult to sell a property, but not not getting title insurance on a property when you buy it doesn't necessarily mean you will have any title problems.
When a title company issues title insurance they will do a title search on the property to make sure that the title is clear. The title insurance is merely an insurance policy against any clouds in the title that the title company may have missed when they did their search.
Either way title insurance will insure that you have clear title, but not getting title insurance doesn't mean you have bad title. It just means you don't have insurance guaranteeing good title.
Ft. Worth, TX · Member since 2008 · 97 posts · 16 votes
18y
Originally posted by "feldmanbro":
Originally posted by "NogginBoink":
It's hard to imagine a more risk-free property to buy w/o title insurance. Title insurance in Texas is quite expensive. I'm debating whether or not I might want to save $700 by not getting this insurance.
It hard to imagine it not being worth $700? How much is the house worth and selling for?
Just my 2 cents
In the end, I do agree with this. I was just curious on getting others' opinions. (I didn't know the exact price of the title insurance until I looked it up when starting this thread. That would be on a $80K house.)
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
18y
A title search doesn't just check ownership it checks liens too. Based on the number of sellers that convieniently "forget" that they had a second mortgage, or their sister was on the deed etc. I can't fathom NOT having title insurance.
Real Estate Investor · Joliet, IL · Member since 2008 · 30 posts · 8 votes
18y
Well, "normally", I would wake up in a cold sweat if I was even DREAMING of buying a property without title insurance, lol. Having said that, if your father and grandpa are the only people who have owned the house, I'd say maybe go without it, as long as you TRUST them both! (I'm in the middle of a deal right now where the family is fighting and backstabbing each other over a few $, so you never know)
I would definitely have a title check though, there can be a mechanics lien or something goofy...
Real Estate Coach · Oakton, VA · Member since 2008 · 695 posts · 43 votes
18y
I would get title insurance no matter what. Of course we are entrepreneurs and are all about taking risks. But this would be a dumb one to take. You need to think of the big picture: It is much better to spend a few hundred dollars up front, than to lose thousands over a problem with the title.
On all of your properties you should get the insurance-just chalk it up as the cost of doing business.
Real Estate Investor · Reading, PA · Member since 2008 · 227 posts · 7 votes
18y
No title insurance???? YIKES!!! Nope, would not do it never, never, never.
Had what appeared to be a great deal go bad when the title search found an IRS lein against the property from 3 owners prior to the current one. The guy died, the property during his ownership was placed into a trust for his kids, divorce ocurred, the guy died, yada, yada, yada.
Long story short no good deal. The transacations took place between several people with out title insurance being purchased by several owners. Now the current owner is stuck and the property will probably go to tax sale because she does not want it. Hope the new buyer does a title search on it.
Only question is how risky of an investor are you?? I try to always minimize my risks even if it means spending a buck or two.
Real Estate Investor · Sacramento, CA · Member since 2008 · 566 posts · 356 votes
18y
Bought a rental from a brother-in-law. He was retiring and selling off his rentals. He paid off a land contract long ago. We ordered Title Insurance and found that the guy he bought it from had never filed a satisfaction of mortgage. Previous seller/lien holder had also moved away to parts unknown. Took two months to track him down and several threats by our lawyer to get title squared away.
While ordering a title search would have shown the same thing, I always get the insurance. It's cheap protection, family or not.
Yee-Ouch! You could be buying a family heirloom first, an investment property second. And with heirlooms, all the sibling/family rivalries, claims of favoritism and perceived debt that go along with them. Here's wishing you have a very thick skin, your wife is an only child and she has very mature family members (her aunts, uncles and cousins who might also love to keep grandpa's or great-grandpa's property in the family). Good luck.
Real Estate Investor · Gainesville, FL · Member since 2008 · 296 posts · 7 votes
18y
Just because someone didn't own the property doesn't mean they can't sue you for it. Yeah, the claim to title may be completely ridiculous but it will still have it's day in court. If you aren't a lawyer you are probably going to need to hire one which is going to be far more expensive than $700.
Fact is, I could sue you right now for that property even if I never owned it. Will I win? No. Will it cost you money to fight it? Yes. Title Insurance pays the attorney's to fight the good fight.
I will NEVER buy a property without title insurance.
Real Estate Investor · Houston, TX · Member since 2009 · 85 posts · 23 votes
17y
Title Insurance is like a pre-paid legal fee. If it goes to court, the title company will legally represent you for however long it takes to clear up the matter. Without the insurance, your attorney would go through $700 fees in a week.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Yes, 2.2 hours.
I ALWAYS get a title policy. Why would you skip this? To save a few bucks? If your deal is that tight, you should consider finding another deal.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
I saw that too Ralph! Althoug in this case, it is a very viable discussion, particularly for newbies who may look to skip some important steps to save money and it ends up costing them dearly.
Real Estate Attorney · Syracuse/New York, NY · Member since 2008 · 29 posts · 4 votes
17y
If you are financing the purchase of this property a bank will require a title search and a title policy. Family or not, you should do a title search and get title insurance so that you can rest comfortably knowing that you have clean title if and when you decide to sell.
My father-in-law owns a house he is interested in selling that I think would make an excellent rental property.
He's owned the property for 10 years.
According to county records, this piece of property has had only 2 prior owners: my father-in-law's father, and HIS father.
It's hard to imagine a more risk-free property to buy w/o title insurance. Title insurance in Texas is quite expensive. I'm debating whether or not I might want to save $700 by not getting this insurance.
So, knowing this will spark a healthy and educational debate... what do y'all think? :D
I think there is no reason at all that you should spend the extra money. There is a reason that the insurance is so cheap, your not going to use it.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Just so you know - If you purchase a HUD house, it doesn't come with title insurance. HUD guarantees a "clear title", but is the government that trustworthy?
I agree that you should get a title search. Title insurance might not be necessary, but a search could show up a lot of stuff. IRS liens, mechanics liens, etc. What if your grandpa died and left the property to your dad and it never went through the proper channels? What if your grandpa just gave your dad the house, but never recorded it? There's a lot that could be going on behind the scenes that won't show up until you go to sell the property and then have problems.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
13y
@ Rob K. - it's been many years since I purchased anything from HUD. I think Reagan was in office, maybe even Carter (just kidding about Carter).
Come to think of it, nope, I don't believe I got title insurance on the two lots that I paid $1,300 for both.
Of course, HUD doesn't make loans, merely insures the lenders for a % of value against loss. So, I presume that, in one of your scenarios, an inherited property was encumbered with a HUD insured loan, the lender would have title insurance.
Of course, title companies will not insure ownership to a proate distributee unless there is an insurable transaction (I.e., a sale). A third party buyer can get an owners policy, which makes more sense, because they are more likely to be candidates for a HUD insured loan.
That being said, there's always a lot to learn and title research is, in my opinion, an essential skill for the investor. Most agents and brokers will tell you that it's the title company's responsibility to clear title. Seasoned investors know that title insurance insures against a demonstrated loss, not an assurance of a profit.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
13y
I agree with those who say to never buy without title insurance. I'm very glad I followed that rule.
Had a vacant lot under contract to buy from 5 heirs. I did title search and title company did as well. 1 sister was executor and signed my contract. Took a few extra days to get all the heir's signatures for closing.
In between the title co's title search and the actual closing, an attorney, who's known for this, approached one of the heirs and offered him some money for a quitclaim deed.
I found that out from the end buyer of my lot a few days later, who had been contacted by the attorney and wanted to get 15K or create problems.