I am closing on a land contract purchase in a few days and I have the option of purchasing Closing Protection Coverage which covers
1) Theft, misappropriation, fraud or any other failure to properly disburse settlement, closing or escrow funds; and
2) Failure to comply with any applicable written closing instructions, when agreed to by the licensed agent.
This is in addition to my normal Title Coverage.
Has anyone purchased this coverage? Why or why not? I'm thinking it might not be a bad idea given its a land contract purchase but don't want to be wasting money on something that isn't necessary. Any thoughts?
Our realtor told us that this coverage is fairly new and was done because there were some dishonest title agencies taking money from buyers but not paying off the note (or seller) with the funds, therefore the buyer thought the property was theirs but it wasn't and they found out the hard way after they never got the deed and the title company was long gone and out of business.
We were told that if you're working with a reputable title agency that this is wasted coverage and money.
Yeah I have to agree with @Susan M. here. It looks like this is only protective coverage against the title company that you are using. As long as they have a good business reputation then you shouldn't be worried. Imagine what suing a title company for fraud would do to their business. That should be enough to keep them honest.
@Sheri Ulm what is said is correct it is protection to cover you against the title company. I don't know what company you are using but i normally advise my buyers against it if the title company has a reputable name. It should cost you 250$ so if peace of mind is worth that to you then do it.
@Susan M @Simon Campbell @ Jeremy Davis
Thanks for your responses. I did pass on this insurance on the two properties I bought with cash but just thought maybe it should be done since this is a land contract. But given the responses here, and my gut instinct, I think I will pass again.
From what I gather, that insurance policy would not have any impact on the type of transaction - only on the actions of the title company. Your best security for a land contract is to have an attorney review the document and to have it recorded.
Thanks again for your response. The land contract was drawn up by a lawyer and it will be recorded.
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