Title Says it all: Should I get title insurance?
Does what type of deal you are doing effect if you should get title insurance? For example I think it would be a good idea to get title insurance if you are buying a foreclosure, but what if your not?
There are all types of situation, oddball ones, that can screw you up, and title insurance can save the day.
A friend of mine came into an inheritance, over half a million, decided he want to get into real estate. The township had some land by the river, with good views that they wanted to sell. He called me all excited, he always wanted to be a developer, now he had the money, so he went for it.
He had someone go down to the county clerks office to check, all clear. After all, the town owned it for years, he figured the town wouldn't rip me off, so why would I need title insurance. So he hired architects to start work.
Some time later, he got the bad news. The town shouldn't have sold him the land, they don't own it anymore. They forgot they transferred title to the state under some "Green acres" program. He went down to the county clerks office and ask about it and check, and he said he had someone check it out, how could this happen? So they told him, we don't have that many title transfers between the local government and the state, and whoever you use didn't know we kept the files in a separate cabinet over there, pointing to it. They then said "you should talk to the title insurance people". Well, he didn't have it.
He got his money back about two or three years later, when the town budgeted the money in. They sold it originally because they were broke. One thing with town governments is there's nothing much you can do if they're broke. Lawyers don't want to sue to get on the bad side of local politicians. They have liability insurance for trips and falls, but this isn't it. He just didn't get title insurance. They guy you sent down to check things out didn't know where they file stuff, and didn't ask. Chances are, the way it happened, the title company would have screwed up to, but it would be on them, and he didn't have to wait several years for the $300,000 he put down. Lucky it was inheritance money, not some money he borrowed to do the deal.
Talking about filing in government offices, I bought a rental, owned it for several years, then refi, and they told me there's a hitch, a title search turned up some violations. I said I don't know anything about it. I investigated, it predates my original purchase. I'm told I could go after the 1st title company. But checking further, they're minor things that can be fixed and corrected via an inspection. I found out later the info sits in the "environmental office" and they don't always transmit the info to the central database. After that, I check the "environmental office" directly if they have violations on a property when doing foreclosures. BTW, with the refi, the bank agreed the violations were minor, we put a few bucks into escrow, to be released when the issue is cleared up.
If a bank loan is involved, I don't think you have a choice. Most title co's won't escrow for you without it anyway.
I have self-closed 6 houses and not purchased it, but I did order up an O&E from the title co that went deep. We are also in the West where an old house is 1920, land maybe from 1800s. East side land is much much older and you dont know what was going down 200 years ago.
I would get it, yes. Here it is customary for the seller to insure title. For the $1-2k ish cost you will avoid the valid pitfalls Frank brings up above.
What value of property? How much is title ins quote?
Title insurance is an overpriced scam, but a necessary evil. IMHO, it's not worth the risk to do a deal without it.
Pay cash and you can self-insure.
There are definitely factors which reduce the risk of a title issue/claim. Show me a chain of title with multiple intra-family transfers, quitclaims, common names, deaths... and I'm buying title insurance.
In CA or western states under Spanish law a Title Insurance is mandatory.
Thanks for all the input everybody.
In other words everyone here says it’s important to get title insurance. But sounds like even without it the problem get resolved. I’m not convinced yet honestly, but I’m going to get a quote and decide. The property is in CT and it’s not required.
fyi for anyone following the thread:
I got title insurance and determined it was definitely necessary. It's also less than 70 bucks where I'm at.