I've combed through the hills of the forums and have not found a straight answer on this. Therefore I am turning to you all for help from those with more experience.
I have recently obtained a quote and coverage option for owner's title insurance on a long term buy and hold from my title agency. I would like to know what others are choosing for total coverage needed? Do you cover a total of what you bought the property for, all equity in, or do you cover total property value (market) given any lien comes forward over the years that lay ahead?
Curious to see what others have done.
Thanks in advance!
@Rick Turman Unless I misunderstood your question, it sounds like you are taking more into consideration than necessary. An Owner's Title Insurance Policy only covers the property from the day you purchased the policy backwards. It does not cover the property going forward. I rarely, if ever, issue a policy for more than the purchase price. I can't speak on behalf of other agencies but if you want me to insure your $50,000.00 purchase for $500,000.00 I will issue that policy. You're going to pay me an extra $1,000.00 for nothing. If title is clear, its clear, regardless of the dollar amount. I look forward to hear the response from the investors.
Owners coverage is typically written in the amount of the purchase price. You can purchase an endorsement for inflation but coverage is capped.
As far as liens coming forward in the years ahead, those would not be covered by title insurance UNLESS the title company missed them in their search or otherwise did not pay/release them at your settlement.
Here's what the standard ALTA owners policy covers:
-Someone else owns an interest in your title
-Improperly executed documents
-Pre-policy forgery, fraud and duress
-Defective recording of any document
-Undisclosed restrictive covenants
-A lien on your title because of a security deed, judgment, tax or special assessment, or a charge by a homeowner's association
Hope this helps.
Thanks Dustin and Tom. From what I understand Tom you mentioned "UNLESS the title company missed them in their search or otherwise did not pay/release them at your settlement." This is why you buy the title insurance so you are covered am I not right on that behalf? So what this states is that The initial title search showed clear which is did, however if something was missed (doesn't show until later) then I would be covered?
Here is another question. I pay to have a search done ($175) Title is clear. Then you shouldn't worry about insurance correct? What is the purpose of insurance then? Just trying to understand this as I always thought it was protection of your title moving forward from time of purchase.
Thanks for your comments!
Correct.....title insurance covers preexisting issues that may have been missed, or were not apparent( some heir pops up from a prior transaction claiming forgery)at the time of the transaction. Hence, this is why you buy title insurance After you have a “clean” title search.
@Rick Turman You say "Title is clear." Those results are only as good as the person who conducted the title search. Abstractors miss things all the time. Just had one miss a $3mm indemnity deed of trust the other day. Yes, he was slightly embarrassed when I pointed out that things weren't adding up.
And aside from search errors, there are things that you can't tell are bad from the search ... such as forgery.
If something shows "later" it would only be covered by title insurance if it was recorded in between the date of the title commitment and the recording date (i.e., the "gap").
You should still buy title insurance... it protects you going forward for things (often undisclosed) that occurred in the past. Have another look at the 7 things I listed that owners' coverage responds to and tell me if you'll be comfortable without insurance (plus attorneys fees) to respond.
No lender does business without title insurance. 1% of our buyers elect to risk it.
But of course I'm biased... so get a second, third opinion on this.
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