Attorneys opinion vs Title insurance?

Question

I have read that most title insurance policy's provide very little insurance against actual title issues. I would like to know how other investors are handling their abstract/title work in the Oklahoma market.

Jay Hinrichs · Answer

@Erica Bird  I have had claims over my 40 years of doing this

a huge one.. were myself as the buyer of a HML portfolio discovered that a borrower in our portfolio had forged reconveyances and Deeds of trust.. so the deeds and releases on said properties were not valid.. Forgery is a covered item in title insurance.. this to the tune of 15 MILLION Dollars.. they paid but after myself being grilled by the big boys from Miami  LOL.

I have one going now on a land locked parcel.. my claim is 450k.. they need to buy me an easement or cut me a check.. they missed that my property was indeed landlocked..

@Jeff Filali  simple encroachments are caught in your area with surveys.. I always wondered why folks would get surveys on properties I was dealing with in Texas.. because we simply NEVER do that here on the west coast.. except larger acreage type deals and maybe.

title insurers want the surveys so they can insure no encumberances.. but those are usually ALTA policies.. my stuff in Charleston being very old plats IE from the 1600 to 1700 all of those have something going on .. so survey is required for title insurance.

Rocky Griffin · Answer

• Thanks @Jeff Filali

Jeff Filali · Answer

@Rocky Griffin The title company I use is Titan Title & Closing Co. in Broken Arrow.  Ask for Christine Beene, she's the Escrow Officer I use on all my deals, and they have an attorney they use.  Chris has been great to work with and really understands investor deals.  Tell her I referred you and she will take care of you.

Rocky Griffin · Answer

@Jeff Filali who is the real estate attorney that you use?

Erica Bird · Answer

That's definitely a different angle.  If I was in your shoes I'd still say get the policy.  In the grand scheme it's cheap.

Erica Bird · Answer

Do you have any specific concerns about what you might not be covered on?

To be upfront, I work at a title company and am therefore biased.  That said, I'm also an investor and it's because of my experience even if I did not work in the industry I would still say the same thing.

Title companies are getting attorney's opinions as their basis of issuing title insurance.  To insure marketable title the attorney has to certify a 30 year chain of title.  Depending on who the underwriter is (First American for example) they have additional requirements that the attorney has worked for 5 years under a title examining attorney before they can prepare their own opinion for example.  They also might do 1,000+ opinions in a year, so they have seen a lot more issues and have a better idea on how to solve a potential title issue that comes up.  So you're likely to have a better experienced examiner through a title company than if you just hire an outside attorney, who maybe does 0-20 independent title opinions in a year.  Even between title companies, some attorneys are better than others.

It is true there are very few actual claims are paid out against title insurance, I've heard that argument before as a reason not to buy title insurance.  But that is also because there are really very few title insurance claims filed.  This doesn't mean title issues don't come up.  Most of what I see is a lot of minor issues such as errors on deeds filed, errors on mortgage releases or assignments, etc.  But when there is an issue most title companies work diligently to correct any defects so that a claim does not have to be filed.  Many title companies even have curative departments dedicated only to addressing issues on closings they have done.  Then if something has to be re-filed, a person has to be tracked down, a quiet title action has to be completed, etc. it is on them to use their resources to fix it.  So if you go through a title company and something gets missed at your closing you have a pretty good chance they will get it corrected without having to file a claim.

If you only have an attorney's opinion and something was overlooked, you can seek remediation from E&O insurance.  But if you have title insurance you have the title insurance company also working to cure it and you can file a claim if you need to.  Buying an owner's policy is a one time expense for as long as you have the property, to me as an investor it is a completely necessary expense.  If you buy & hold the cost is small considering spread over your time of ownership.  If you flip the cost is very high compared to how long you have the property, but if you do a lot of transactions you should ask your title company for discounts.  If you're bringing in regular business, the title company will usually work with you to keep fees lower, you just have to ask.

Also, there are other advantages to working with a title company besides the insurance aspect.  If you have a good relationship they can be source of connections for deals and other contacts, market information, knowledge about lenders doing certain types of financing, general information resources/forms/answering questions, etc.

Rhett Tullis · Answer

well it is insurance after all they are in business to make money not pay on claims.  you can also be sure that they are very thorough when they do their title research so that they dont sell a policy for anything they feel there is a high risk of there being a claim on.  I would hazard a guess though that in OKC metro you are less likely to have a title issue than in some of the other cities I have invested in.  I see it happen periodically but not often.

Jeff Filali · Answer

@Rocky Griffin  I use a title company who uses an attorney, and haven't had any issues yet. I know they for sure use a good attorney, because we had a property that around 10 feet of the garage and porch were built over the building line, and the attorney caught it.  We were still able to get title insurance, but it had disclosure about that portion of the porch and garage may not be covered in the future if we sold it.  We flipped it, and used same title company, and didn't have any issues, but the same disclosure was put into the buyers policy also, and the buyer was fine with it also.  But I guess you wouldn't really know until in the future I guess, after selling to someone else, who sold it again.  If you need a referral for the title company I use, feel free to reach out to me.  They're very investor friendly.

Attorneys opinion vs Title insurance?

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