Investor · LA · Member since 2018 · 24 posts · 6 votes
Hello, I'm under contract on a 4 unit apartment building I plan to buy and hold. I'm placing title insurance because I want to be protected and plus the lender requires it. However something new came up today. My title company asked me if I wanted "Buyers" title insurance too. It would run an additional $500 to $1000.
I had not heard of this policy or basically figured title insurance was title insurance. Do you get both or just whats required by the lender.
You stated: "I'm placing title insurance because I want to be protected and plus the lender requires it."
IF that insurance does not include Buyer/Owner's Title Insurance, then the Lender's Policy will not protect you.
YES by all means please do obtain the Owner's Title Insurance Policy.
Your Lender requires that you purchase a Lender's title insurance policy for them and in my State of Illinois the buyer pays for their Lender's Policy.
However, in my State, the Seller' pays for the Owner's Policy so make sure that your Contract does not include a Seller's obligation to pay for your Policy, and if it does, make sure Seller pays for the Owner's Title Policy at Closing.
Finally, make sure that the Owner's Policy has any and all "Exceptions" that are unacceptable "waived" which is the title company's guarantee that your final Owner's Title Policy will not be subject to those unacceptable "Exceptions".
For example, when the title company does a search of the county records on the property you are buying, they will create a Title Commitment, a step before a Title Policy, which will state the current status of the title of the property.
Exceptions will be raised, some that can't be waived or removed like Easements, Building Lines, Covenants and Restrictions and the Plat of Subdivision that created the property etc.
Many Exceptions can and you should insist that they be waived (guarantee that they will not be stated in the final Owner's title policy), such as the Seller's current mortgage, unpaid HOA fees, unpaid and late property taxes, recorded liens/mortgages of record, mechanic's liens, federal tax liens of the Seller etc.
The title company may be unable or unwilling to remove these/certain Exceptions, which mean you will take title subject to/no title insurance regarding these unacceptable "Exceptions". DON'T DO IT, ONLY TAKE A CLEAN/CLEAR POLICY.
Bottom line, it's not enough to just get an Owner's Policy, you want to get an Owner's Policy without there being Exceptions / title problems/issues that will become your problem after closing BECAUSE the Owner's Title Policy includes (have not been removed) unacceptable Exceptions (issues which the title company will not pay for/be responsible for/ defend you against after closing).
Investor · LA · Member since 2018 · 24 posts · 6 votes
6y
Thanks guys!
I will get them both, I hope the buyers title insurance policy is not at the 1k higher end range. Still worth the protection but 1500 seems high for both policies.
Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
6y
@Richard Jumonville, traditionally the owners policy is paid for by the seller in IL. You as the buyer pay for the lender's policy, but the owners policy is what covers you and what you care about....so you either want to buy that, or see why the seller isn't paying for it. Is this a short sale or foreclosure? Reason why the seller isn't covering it? Do you have an atty that is helping you?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
Yes, you want the Owner’s policy. Your area has typical guidelines for who pays for what closing costs, but your specific purchase contract spells this out in specifics. What is standard in another region/state is irrelevant to your transaction.
