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Nana Sefa
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Owner’s title insurance - to get or not?

Nana Sefa
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Posted Jan 3 2024, 13:02

Which of you get owner’s title insurance? And who doesn’t get owner’s title? Why do you get or not get? Thank you. 

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Peter Walther
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Peter Walther
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Replied Jan 14 2024, 14:18
Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:

Many people are just saying 'you should get it' without providing any reasoning. 

Let's look at some data: 

Q4 2022, ALTA premiums were 4.4B. So maybe for all 2022 $16B. In all 2022, payouts were $600M. That's a 3.75% payout ratio.  

https://www.prnewswire.com/news-releases/alta-reports-full-y...

For hazard insurance here's Statefarm in 2021: "Earned premium was $27.6 billion. Incurred claims and loss adjustment expenses were $20.0 billion". That's a 72% payout ratio. 

Is the risk from hazard damage lower than the risk from title damage? I wouldn't guess so.


 You're comparing apples with oranges.  Try looking at the combined ratios.

Title Insurance: Combined Ratio data was reported at 103.300 % in Jun 2023. This records a decrease from the previous number of 105.200 % for Mar 2023. Title Insurance: Combined Ratio data is updated quarterly, averaging 101.550 % from Mar 2012 to Jun 2023, with 46 observations. The data reached an all-time high of 108.500 % in Mar 2012 and a record low of 94.900 % in Dec 2021. Title Insurance: Combined Ratio data remains active status in CEIC and is reported by National Association of Insurance Commissioners.

In 2020, the combined ratio of the American property and casualty insurance industry was 97.5%.

I'm open to changing my mind. Can you post the sources?

How Do I Calculate the Combined Ratio? (investopedia.com)

United States | Title Insurance: Industry Financial Snapshots | CEIC (ceicdata.com)

U.S. : combined ratio P/C insurance industry | Statista


 This means that insurance companies spend a lot on underwriting, not necessarily that the risk protection for investors is the same. 


 What is your specific issue/claim ?

I had one 2 years ago and I consulted to Peter about my claim and he tell me what would happen and exactly it happened 100% like what he said, word by word. Although disappointed, but not too unexpected.

I'm impressed by all Title Expert in this thread though, so much knowledge.

My claim is saying 'you should always buy title insurance' is wrong. Be aware of how much you are paying for what amount of risk protection and then decide for yourself. A lot of peopled don't realize how low the payout ratio is. 

Properties are purchased at the auction all the time without title insurance and a lot of people get rich doing it. 


 I've been driving for over 50 years and have never made a claim yet the state says I can't drive without it.  I've been paying homeowner's insurance for about 45 years and never made a claim though I'm thinking about self-insuring since the premiums keep going up.  I keep paying for life insurance, but I haven't died yet.  I think any reasonable analysis of the cost of title insurance versus the benefits has to lead to the conclusion it is the best insurance dollar for dollar of all types.  But yes, self-insuring is cheaper, until you have a claim.

You've pointed out a bunch of insurance you haven't needed yet, none of this is evidence you should always buy title insurance. 

If you have such reasonable analysis, I'll wait to see it to be persuaded. 

Self insuring is cheaper in the long run even if you have a claim. Insurance is a negative expected value product, that's normal and expected. See my post about the commission above. 


 sorry my friend, but you folks are very expert and this is very educating thread.

sorry another dumb question, what's self insuring ? what's the process ? why it's cheaper ? please elaborate....


 Self-insuring simply means you're not buying a title insurance policy and are assuming the risk of a title problem.

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Shafi Noss
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Shafi Noss
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Replied Jan 14 2024, 14:26

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

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Peter Walther
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Peter Walther
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Replied Jan 14 2024, 14:28
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I think it's ironic that Fannie Mae was bailed out by the federal government because of its incompetent underwriting yet you assume this one will work out.  I find it hard to believe that it has not experienced a loss, but I guess it depends on how one defines loss.

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Peter Walther
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Peter Walther
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Replied Jan 14 2024, 14:31
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.

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Peter Walther
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Peter Walther
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Replied Jan 14 2024, 14:33
Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:

@Peter Walther Title companies take a 70%+ commission of the title insurance premium leaving the insurer 30% or less, of course their combined ratio will be normal. Premiums could double and if it was all paid as commission, the combined ratio would be the same. But the cost per unit risk to customers would still double.

The question is what's up with that other 70-85% of the premium. A title search costs a few hundred dollars and supplies the bulk of the risk protection. Someone with basic education can perform one, especially as digital records become more available. 

As far as I know, attorney's are paid a large portion of the premium for performing advanced title searches, I don't know how this works super well so if you have counter evidence let me know. I suspect there is a disproportionate cost-to-risk ratio in this activity specifically, not that it's always wrong to do, but there is some lopsidedness in this specific area and everyone is forced to pay it when they could instead pay more for the insurance itself but with a lower overall cost. 

I mean look, well-functioning free markets create fair prices. This only breaks down when consumers lack transparency and mobility which I think happens in a lot of industries including title. But the the end-insurer doesn't have to be making a killing for the consumer to have a poor cost-to-risk ratio. 


 In today's most real estate transaction, we don't have free market, what we have is mere duopoly/monopoly system with price fixing. Smart customer like you would always ask what's the purpose that I need to pay for this and that. I am learning a lot, but again, fair price in free market is fake in this country.


 What contry do you believe has a fairer version of a free market?

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Shafi Noss
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Shafi Noss
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Replied Jan 14 2024, 14:33
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly. 

FNMA itself agrees: 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."

https://singlefamily.fanniemae.com/media/37606/display

Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it. 

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Peter Walther
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Peter Walther
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Replied Jan 14 2024, 14:39
Quote from @Shafi Noss:
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly. 

FNMA itself agrees: 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."

https://singlefamily.fanniemae.com/media/37606/display

Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it. 


 I think gas prices are higher than they need to be.

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Tom Gimer
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Replied Jan 14 2024, 14:46
Quote from @Peter Walther:
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.

I was just thinking it would be interesting to hear what happens in the context of AOLs when fraud or forgery (impossible to identify when examining title) is discovered.

IMO there would be no breach or proximate cause and thus no attorney liability. Of course this would be covered with title insurance.

Who pays?

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Shafi Noss
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Shafi Noss
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Replied Jan 14 2024, 15:06
Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly. 

FNMA itself agrees: 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."

https://singlefamily.fanniemae.com/media/37606/display

Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it. 


 I think gas prices are higher than they need to be.

You are implying that what people think prices should be doesn't matter because free market forces will determine the correct price. The difference is it's super easy to compare gas prices with no education whereas much more difficult for non-professionals who buy a complex policy maybe a couple times in their life, and often have no education in finance, to compare title policies. 

We don't live in a free market economy we live in a mixed economy where gov'ts step in and create regulations when it's not reasonable to expect consumers to be well educated enough to evaluate their options correctly on their own. Case it point, mortgage regulations, professional licenses like doctor's licenses, blue sky laws, accredited investor restrictions, etc. Why not just let people choose their own investment providers? They could, until a lot of normal folks got severely hurt by investment fraud. That's when the regulations were put in place. 

And many states do regulate title insurance prices, by providing a spectrum of regulations. But regulations do not update in real time the way market demand does, so regulations lag behind the markets and create price inefficiencies. 



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Shafi Noss
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Shafi Noss
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Replied Jan 14 2024, 15:11
Quote from @Peter Walther:
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.


Different products for different use cases, each has it's pros and cons. Hopefully they can co-exist and serve consumers well by providing more options. 

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Bubba McCants
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Bubba McCants
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Replied Jan 14 2024, 17:22

Title, insurance and surveys are two of the most important tools you can get when purchasing a property. Not to mention it will also help you sell the property if you intend to flip or sell in the future.

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Jorge Vazquez
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Jorge Vazquez
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Replied Jan 14 2024, 20:49

I respect everyone's opinion. After doing thousands of transactions, I've come to the conclusion that the decision to purchase owner's title insurance is not always an issue of being able to self-insure. Rather, it's about balancing the risks against the potential benefits. Consider this - even if there's only a 1% chance of encountering title problems, if you're not dealing with a large number of properties, that risk can still feel significant. If you're doing a lot of deals, you might be able to handle any issues that arise. However, for most of us, especially if we're not frequently buying and selling properties, it's safer to have insurance as a backup. Ultimately, it's a matter of determining how much risk you're comfortable with and how involved you are in the property game.

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Nana Sefa
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Nana Sefa
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Replied Jan 15 2024, 05:17
Quote from @Bubba McCants:

Title, insurance and surveys are two of the most important tools you can get when purchasing a property. Not to mention it will also help you sell the property if you intend to flip or sell in the future.

How does owner’s title insurance help me sell the property? Thanks. 

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Bubba McCants
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Bubba McCants
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Replied Jan 15 2024, 08:00
Quote from @Nana Sefa:
Quote from @Bubba McCants:

Title, insurance and surveys are two of the most important tools you can get when purchasing a property. Not to mention it will also help you sell the property if you intend to flip or sell in the future.

How does owner’s title insurance help me sell the property? Thanks. 

 Good morning, have a clear title is a marketable asset for any Buyer, future owner. 

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Nana Sefa
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Nana Sefa
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Replied Jan 15 2024, 09:11
Quote from @Bubba McCants:
Quote from @Nana Sefa:
Quote from @Bubba McCants:

Title, insurance and surveys are two of the most important tools you can get when purchasing a property. Not to mention it will also help you sell the property if you intend to flip or sell in the future.

How does owner’s title insurance help me sell the property? Thanks. 

 Good morning, have a clear title is a marketable asset for any Buyer, future owner. 

Not buying owner’s title does not cloud my title. 

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Peter Walther
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Peter Walther
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Replied Jan 15 2024, 09:31
Quote from @Shafi Noss:
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly. 

FNMA itself agrees: 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."

https://singlefamily.fanniemae.com/media/37606/display

Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it. 


I understand a court found NAR members have been cheating sellers for years.

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Peter Walther
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Peter Walther
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Replied Jan 15 2024, 09:36
Quote from @Tom Gimer:
Quote from @Peter Walther:
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.

I was just thinking it would be interesting to hear what happens in the context of AOLs when fraud or forgery (impossible to identify when examining title) is discovered.

IMO there would be no breach or proximate cause and thus no attorney liability. Of course this would be covered with title insurance.

Who pays?


 From the Fannie Mae guidelines:

provide the following statement: We [I] agree to indemnify you and your successors in interest in the [mortgage] [deed of trust] opined hereto, to the full extent of all losses attributable to a breach of our [my] duty to exercise reasonable care and skill in the examination of the title and giving of this opinion.

I think the threshold for proving a breach is pretty high. The indemnification also excludes losses from mis indexed docs. That's one of the reasons I find it hard to believe there have been no losses. Also not mentioned is what happens when the indemnifying attorney dies or goes out of business and doesn't bother to get a tail rider for his E&O?

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Shafi Noss
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Shafi Noss
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Replied Jan 15 2024, 09:38

@Peter Walther Yeah this one? 

https://www.cnn.com/2023/11/05/homes/nar-verdict-real-estate...

Seems like it could be a big deal. 

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Peter Walther
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Peter Walther
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Replied Jan 15 2024, 09:41
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 

I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly. 

FNMA itself agrees: 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."

https://singlefamily.fanniemae.com/media/37606/display

Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it. 


 I think gas prices are higher than they need to be.

You are implying that what people think prices should be doesn't matter because free market forces will determine the correct price. The difference is it's super easy to compare gas prices with no education whereas much more difficult for non-professionals who buy a complex policy maybe a couple times in their life, and often have no education in finance, to compare title policies. 

We don't live in a free market economy we live in a mixed economy where gov'ts step in and create regulations when it's not reasonable to expect consumers to be well educated enough to evaluate their options correctly on their own. Case it point, mortgage regulations, professional licenses like doctor's licenses, blue sky laws, accredited investor restrictions, etc. Why not just let people choose their own investment providers? They could, until a lot of normal folks got severely hurt by investment fraud. That's when the regulations were put in place. 

And many states do regulate title insurance prices, by providing a spectrum of regulations. But regulations do not update in real time the way market demand does, so regulations lag behind the markets and create price inefficiencies. 




I find it interesting that when gas station one's price goes up by ten cents, an hour later the gas station across the street raises its price by ten cents.  I realize collusion under the law requires direct cause and effect but come on.

I understand a court recently found NAR was fixing prices.

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Peter Walther
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Replied Jan 15 2024, 09:50
Quote from @Shafi Noss:

@Peter Walther Yeah this one? 

https://www.cnn.com/2023/11/05/homes/nar-verdict-real-estate...

Seems like it could be a big deal. 


That's the one. Some are predicting the end of NAR.

NAR President’s Resignation Sparks Agent Frustration (therealdeal.com)

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Bubba McCants
  • Panama City Beach, FL
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Bubba McCants
  • Panama City Beach, FL
Replied Jan 15 2024, 09:54
Quote from @Nana Sefa:
Quote from @Bubba McCants:
Quote from @Nana Sefa:
Quote from @Bubba McCants:

Title, insurance and surveys are two of the most important tools you can get when purchasing a property. Not to mention it will also help you sell the property if you intend to flip or sell in the future.

How does owner’s title insurance help me sell the property? Thanks. 

 Good morning, have a clear title is a marketable asset for any Buyer, future owner. 

Not buying owner’s title does not cloud my title. 

 Correct, that wasn't a statement on the thread. Thanks! 

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Replied Jan 15 2024, 10:11
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.


Different products for different use cases, each has it's pros and cons. Hopefully they can co-exist and serve consumers well by providing more options. 


 Hi Shafi/Peter:

Thanks for both your expert commentary. Reading from Shafi comment is intriguing for me.

I have question though. I like to digging property record/deed/title ; so my question would be, is there any difference of the output from what I can find out personally via internet search , and from title search that we pay ?? is there differences ?

For example, I could find a record of code issue in building I'm chasing , but the title company can't find out that. Are you guys literally only checking from the county or there's something else that I don't know ?

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Replied Jan 15 2024, 10:13
Quote from @Shafi Noss:

@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical. 


 Based on your answer, now I realized I can just force title company to issue title insurance when I am selling home.

I am about to ask one title company in Hawaii if they can do like this. I was shocked reading this is a possibility.

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Replied Jan 15 2024, 10:15
Quote from @Peter Walther:
Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:

@Peter Walther Title companies take a 70%+ commission of the title insurance premium leaving the insurer 30% or less, of course their combined ratio will be normal. Premiums could double and if it was all paid as commission, the combined ratio would be the same. But the cost per unit risk to customers would still double.

The question is what's up with that other 70-85% of the premium. A title search costs a few hundred dollars and supplies the bulk of the risk protection. Someone with basic education can perform one, especially as digital records become more available. 

As far as I know, attorney's are paid a large portion of the premium for performing advanced title searches, I don't know how this works super well so if you have counter evidence let me know. I suspect there is a disproportionate cost-to-risk ratio in this activity specifically, not that it's always wrong to do, but there is some lopsidedness in this specific area and everyone is forced to pay it when they could instead pay more for the insurance itself but with a lower overall cost. 

I mean look, well-functioning free markets create fair prices. This only breaks down when consumers lack transparency and mobility which I think happens in a lot of industries including title. But the the end-insurer doesn't have to be making a killing for the consumer to have a poor cost-to-risk ratio. 


 In today's most real estate transaction, we don't have free market, what we have is mere duopoly/monopoly system with price fixing. Smart customer like you would always ask what's the purpose that I need to pay for this and that. I am learning a lot, but again, fair price in free market is fake in this country.


 What contry do you believe has a fairer version of a free market?


 maybe Denmark, I just throw something here LOL But US is very far from free/fair market. It's monopolistic in nature especially when it comes to transaction involving a commission.

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Shafi Noss
  • Washington, D.C.
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Shafi Noss
  • Washington, D.C.
Replied Jan 15 2024, 10:33
Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:

@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.

Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans. 

"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers. 

Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."

...

"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."

https://singlefamily.fanniemae.com/media/37606/display

So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so. 


I also think it's ironic that title insurance was developed to address short comings in AOLs.  I guess what's old is new again.


Different products for different use cases, each has it's pros and cons. Hopefully they can co-exist and serve consumers well by providing more options. 


 Hi Shafi/Peter:

Thanks for both your expert commentary. Reading from Shafi comment is intriguing for me.

I have question though. I like to digging property record/deed/title ; so my question would be, is there any difference of the output from what I can find out personally via internet search , and from title search that we pay ?? is there differences ?

For example, I could find a record of code issue in building I'm chasing , but the title company can't find out that. Are you guys literally only checking from the county or there's something else that I don't know ?

I think @Peter Walther would know this best, would be interested to hear his answer too.