What part of needing title insurance do they no understand

Question

Looked at 3 houses today. Pass the info to my wife who is in upper management at a title company. She does some homework and say these are not good properties due to not being able to insure these properties.

Tired of these agents saying yes its all good.  The title work is already done.  I just need to pay a 250 fee.

I even offered on a house and the agent said that will get it.  I am getting so pissed at these people.

I want a property, I need a property, I have cash and I still can't find a property.  God I am so pissed.

Ok rant over

Detroit, Michigan area is going crazy

David Krulac · Answer

@Scott K.

The Tax Sales are the problem, I see it all the time here.  The title companies don't want to insure third party sales because there is the chance that the former owner can come back and make a claim against the property.  Here the former owner can come back for 7 years, after they find out about the sale, not 7 years from the sale date.  On one property that I'm familiar with the title company won't insure a tax sale that is from 19 years ago, because the statute here for adverse possession is 21 years, so the want the tax sale to be 21 years old before they will issue title insurance.

Real estate agents are not title experts, maybe 1 in 1,000.  Somebody I know has a property that he has financed when he bought it and refi-ed later both times with title searches and title insurance.  When I looked at the title I found 2 clouds in about 5 minutes.  Different people look for different things.  There was a title company here that would issue title insurance if the sale was over a year and there was no contesting lawsuit.  Well they got burned on a couple properties and had to pay out claims, so they changed their policy and now don't issue any title insurance on tax sales.

Title insurance is the only insurance that insures PAST events, so it is highly profitable, and they like to have no claims whatsoever.  When they get claims they are quick to change their policy to eliminate the source of their claims.  Since tax sales are such a small portion of their business and it is common if not rampant to have problems, it is easy to eliminate tax sales from your title business and eliminate a whole host of problems for a small percentage of your business.

There are a couple things that you can do.  One of which is since your wife is a title expert there are 2 ways to cure the title cloud, and she can help you do that.  If you buy these properties you can buy them without title insurance (presumably at a deep discount) which I would not recommend except for extremely knowledgable and experienced investors.

If you're willing to buy the properties with title defects and cure the defects, go purchase at the tax sale yourself and cut out the middle man.

Scott McMahan · Answer

if it's because of a tax sale, Meridian will insure it without quiet title, where most will not. I'm sure your wife excels at her job, and I've found that all title companies are not created equal. For example, I've talked to a couple title companies, including my brokers title company, that won't insure title when there's an assignment fee on the HUD-1. An assignment fee doesn't make the title uninsurable, but it's outside of their box so they don't do it. Of course, if you're talking encroachment issues that might be different, but there are solutions to most title issues and some title companies just don't deal in solutions.

It sounds like your biggest frustration is with lazy and uninformed real estate agents, which I completely understand.

John Rooster · Answer

Unless they are all owned by the same owner, the odds of having three of three properties not be insurable are somewhere around 40,000-1. So, either you are very unlucky, you are looking at properties with easement/boundry issues in very old neighborhoods, or your wife isn't very good at her job.

Scott K. · Answer

This is what this company that I am trying to deal with does.  They work with big money investors that buy 100's of properties.

I might be over reacting but I want this property at the price we agreed on.  It will make a good flip or a great buy and hold property.  I think it may work out in the end.

Ned Carey · Answer

Why would an agent know about title issues? I understand frustration with agents (I am assuming you mean the real estate agent here) but they have no way of knowing whether it is insurable or not.

The title can be good but some title companies may choose not to insure it. They are two different issues. Even if the title is good, it costs title insurers money to fight a challenge. If there is any chance it will be challenged, good title or not, they don't want to insure.

I actually had a title company tell my buyer the title was not good simply because they chose not to insure it.  Funny the next title company had no problem insuring it.

Scott McMahan · Answer

Meridian will insure tax sales here and get you a warranty deed. It's not cheap, and it takes a few weeks, but they'll do it. If you need their contact info let me know.

Scott K. · Answer

Yes its a tax sale.  I even asked him more than a few times that I have to have title insurance on the property.

Yes I am getting pissed with these agents.  What are they thinking that I will still buy it without being able to get insurance.

Scott K. · Answer

Yes they were all owned by the same people.  She is very good at her job.  I am a very lucky guy.

Sharad M. · Answer

Hi Scott,

Why can't these properties be insured? Is there any particular reason? Are these all by the same seller or different sellers?

What part of needing title insurance do they no understand

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