Buying a house without title insurance?
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
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.
Wow, there is an old joke in the title insurance world about a bank who kicked back a title examination by an attorney who only went back to the Louisiana purchase and the reply given by the attorney educating the banker of the Spanish acquiring the western world, deeded by the Queen who had been given rights by God.
Someone owned that land 50 years ago and there have been title deficiencies older than that causing problems and more money to cure than a title policy. That's funny by the OP, only three owners, they must have lived a very long time!
The only time I did not get coverage is on very short holds, flips, double closings as done in the old days as I could personally defend my term in title and sue the guy behind me. Unless you can self insure your position I highly suggest getting title coverage in your name. And, any lender's policy doesn't cover you, it only covers the lender. :)
@Rick Harmon,
I agree with you as well. I taught myself how to search titles and I was lucky that in Fulton County/Atlanta you can look at everything when you're in 'the morgue'. Go back to the 1800's.
In 2005 that came in really handy, because I traced back old inventory of a bankrupt mortgage company, which had had some properties in then 'war zones'. The bankruptcy trustee didn't deal with them, because the houses were ready to be torn down and that would have cost more than it was worth. So, they let them sit.
Going through all their properties, I ended up finding 10 vacant lots, that were all still owned by this mortgage company. This was 12 years after the bankruptcy was finished. I figured out all the legalities on how to buy these properties, with proper title insurance.
If I hadn't gotten into doing my own title searches before I bought anything, I would have been one of the other investors, who for 12 years were just scratching their head, while the neighborhoods came back up in value.
Seems there is an implication here that investors should do title examinations. Unless you have been trained in a title plant AND have coverage by an insurer for your work OR you are an attorney familiar in title examinations and insured, but such coverage wouldn't cover you on your purchases anyway, you have no business attempting to do title examinations.
What is said to be a title search is not or may not really be an examination of title! The defendant who represents themselves has a fool for a client! They may think they know, but they don't even know what they don't know.
Investors can certainly check and verify title to the current holder of record.
You have no idea that Billy, who sold the property to your seller, inherited the property with a sibling who was married and quit claimed only their interest to Billy prior to the sale and the marriage, only being three months old was never picked up in Billy's sale....he had no idea. There are differences in title, joint and several ownerships, rights in title, life estates, conveyance of partial interests and improper conveyances, liens, rights of easements and encroachments apparent by a proper survey, along with claims by creditors and others that puts even the most astute investor in areas of the unknown.
To imply that investors should learn to do a title examinations is not good advice. You might as well get your law degree, as you'll need much of it to do an examination......and understand, not just any attorney would attempt to do title work. Then to think some investor is going to be self educated and learn how is really over the top.
As an investor, if you aren't making more than a title examination clerk and a little profit to the title company, then you really need to find something else to do. I certainly have the aptitude to do such work, many do, but I don't for two reasons: 1. It's not a wise use of my time and money, and 2. I don't have the tools, data files, research information and public records at hand to search out the hundreds of possibilities that could exist. Actually, another reason, I don't is that I don't want to pay for any mistake or error I might make, that's why we have title insurance, to insure conveyances.
So, lets better define this, investors confirm the owner of record and can go back to the last transaction. You can certainly look further back to see if any red flags pop up, but you're not qualified to assess all the title issues that could exist.
As I said, always get title insurance unless you have the money to defend title out of your pocket. Now, I can see where the initial thinking of title coverage on a cheap lot is not worth it. That was common in our nonprofits with such lots, until we started building and the risk of loss became greater, you can always get it insured later on.
Not saying not to learn as much as you can, just saying this is a specialized legal filed that has no room for amatures and DIY types trying to save a few hundred bucks. BTW, why don't you learn how to get the seller to show good title and pay for the examination at closing, if it doesn't close, they get the bill! :)
@Billy Gulley ,
I don't think anyone is suggesting to replace a title company's title search with your own, to save money.
But rather the suggestion was to learn how to do it, so that you can figure out what you're dealing with when you're buying something. Usually closing attorneys/title companies don't do title work until right at the end. I don't want any surprises and will gladly take a look at the title ahead of time, maybe even before I make an offer.
I've often dealt with very old properties, that were built around 1900. Some of my cases were so complicated that 1 or 2 closing attorney told me that they don't want to deal with my deals. So, if I know what i"m dealing with and can lay it all out for everyone involved, it'll be much cleaner. Also, I can deal with title problems right at the beginning.
Dealing with difficult titles has made me some good money. And I always get title insurance
That's great! :)
Yes, seems all the properties I bought or financed went back to 1803. God only knows how far back any property goes. Those in Hawaii and Alaska don't go back as far as you had to. :)
It is best to get title work toward the end when other issues are tied up and you know they should close before spending the money, I agree.
After you get into higher volumes of business with your title company they will begin doing a little more. Mine would do a search for me prior to underwriting really as timing was usually under the gun and my property searches (that I initially verified owner of record and went back a couple of sales...as interesting as some might be) I'd just order title, if it didn't close they didn't bill me.. that's a good relationship!
I also did deals requiring the seller to show proof of good title, at their expense, so that means they get the title search and pay for it. I know it's different in different areas, but making the seller prove or show good title to me is only common sense and me paying for my own title insurance coverage as the insured makes more sense. Regardless of custom, you can negotiate the matter. :)