Title insurance question

14 Replies

After reading several post on the subject I'm still a little confused, please help.

When buying property's from web base auction houses like HUBZU, they offer to split closing cost and they purchase title insurance for buyer, this saves said buyer money. (obviously they pick the closing attonery and title company) I'm confused why many people say to purchase the policy on your own, Why?

Im assuming that a title policy for the buyer is covering the buyer regardless of who actually hires the title company. Why am I sensing paranoia?

Thanks in advance for replies! 

Title Insurance: Lender's Policies and Buyer's Policies

Title insurance is typically a combination of two policies: a lender's policy and a borrower's policy. Your lender -- assuming you're taking out a mortgage loan -- will require that you buy a lender's policy (also called a "mortgagee's policy") to pay for its legal defense costs and reimburse any mortgage payments you can't make because you've lost the house to someone else's claim on it.

The lender may also require you to buy an "owner's policy," covering your own legal fees and other losses, as yet another step toward protecting the lender's collateral. Even if your lender doesn't require you to buy an owner's policy, you should probably consider buying one anyway.

Why do you need both policies? No preliminary title search (see below to learn about title searches), no matter how complete, can predict when a long-lost relative or heir will turn up or whether paperwork buried for years under a misspelled name will reveal a claim concerning the property. The lender's policy will kick in to defend such claims and, if all goes well, might resolve the matter against whoever brought it up.

But what if the court decides that, for example, the long-lost relative is in fact the house's true owner? Then the lender's policy will reimburse the lender for what you owe on the mortgage -- but you'll be out the amount of your down payment and other principal payments, not to mention that you'll no longer own the house. The owner's policy, however, will cover your financial losses (though you might still have to move out of the house).

http://www.nolo.com/legal-encyclopedia/title-insur...

are you paying cash or financing?

First of all, HUBZU's closing coordination is worse than most REO's. Secondly, you don't save much money, and the biggest problem is they will often offer title insurance with "exceptions" to things usually covered....unrecorded code violations, water/utility bills, etc. It's still "title insurance" but doesn't cover a lot of little things that could costs more than the supposed savings of using their title co.s.

Cash purchase.

Wayne, is their a easy way to tell if the title insurance has "exceptions" in the policy? 

I would probably go with the free insurance but we can ask @Kevin Hubzu 

@Alan F.

The auction terms will give you a clue, otherwise you'll see the exceptions in the "B" section of exceptions, in the title commitment/policy when you get it, preferably before closing.

The next property I'm purchasing is through Hudson and Marshall and they're offering the same thing as hubzu (use their attorney and their title company and they will provide  me with buyers title insurance. -Cash purchase 

Just making sure I'm not making a mistake trying to save a couple hundred dollars. 

Thanks for the input! 

Using HUBZU's title company is like using your soon to be ex-wife's divorce attorney...it seldom ends up well for you.  HUBZU's title company (like all title companies) are not there representing your interests, they're representing their own and as such, they will they can to provide as limited a title policy as possible because they don't want liability either even though they're in the business of indemnifying others. 

I really thought this would be a black and white topic but I guess not. :(  

I assumed if I have a "buyers title policy" regardless of who choose which title company wrote said policy, I would still be covered in the event of a lien or issue.

So if theirs no exemptions on the policy it really doesnt matter who I get the policy from, correct?

thanks for all the feedback!

Not true. You cannot only look at the exemptions. You need to review the entire policy. If you are not comfortable risking your entire investment on your knowledge of legal terminology then you need to hire your own title company.  When you do that, they have a fiduciary responsibility to you and they will make a much greater effort to insure you have the coverage you need so you don't sue them. Keep in mind that in most parts of the country. title companies are run/owned (often the must be) by lawyers. If you are going to play with lawyers you really need a good one of your own. It is not worth saving a few hundred dollars to risk your entire investment unless you are really experienced in this arena.

Thanks guys for all the replies-very helpful! 

I decided to do my own title search as a  back up: I verify chain of title, check all taxes are paid, researched all different types of liens are satisfied.

Don't worry, I'm still getting a buyers title policy but thought it would be a good learning experience, which it was! 

this is a bit off topic,

I think TI is a bit of a scam.

Why doesn't the american title assn or some other group publish stats on title insurance claims made nationwide? my feeling is that the risk of a claim (actual claims made, not just purported issues with title) is EXTREMELY low. but we can't know how low because no one will actually publish any large scale, nationwide stats on claims data.

@Alan F.

Unless you are comfortable reading title policies and schedules, always use your own title company. Bottom line, it's not worth the savings. And Hubzu's title company is one of the worst I've ever experienced, I second @Wayne Brooks notes on the matter. 

I guess it could be argued that all insurance policies are scams...right up till the time you need the coverage. 

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