People know how important Title Insurance is, but don’t realize how important it is

Albany, New York
Tax Liens & Mortgage Notes
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People know how important Title Insurance is, but don’t realize how important it is

Mendy J.
Investor · NY · Member since 2026 · 121 posts · 42 votes

Had a interesting story last week That I would like to share with the BiggerPockets audience

we had a 2 unit duplex I was about to close that week title was clear Everything Looked pretty fine and then at the final review ( This was a cash deal, needed some renovations, and I plan to refinance it afterwards ) I got an email from the title company that there is $100,000 lien from the previous owner, After diving deeper in they discovered that this happened Because the current owner Bought the property with cash And didn't take out Title insurance because A lot of people may think" na it's not going to happen to me" Therefore, he didn't have a title policy and Now he got an IRS lien from the previous owner that was placed just about the time he was closing back in 2019. And the deal Obviously fell apart

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Diana KhanPro Member
Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 374 posts · 144 votes
4w

@Mendy J., this is such a good example of something cash buyers sometimes overlook. A title search and an owner’s title insurance policy are not the same thing. The search tells you what can be found in the records at that time, while the policy may provide protection if a covered title problem from before the purchase shows up later.

When there is no lender involved, buyers sometimes skip the owner’s policy because nobody is requiring it. But that is also when the decision to protect yourself falls completely on the buyer.

I’m glad your title company caught this before you closed. A deal can look perfectly fine until one title issue changes everything.

[email protected]240-266-0291
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  • Gregory AcsPro Member
    Lender · MD · Member since 2025 · 162 posts · 62 votes
    4w

    That's a great reminder that due diligence doesn't stop once you're under contract. Most buyers focus on the loan or inspection, but issues with title can be just as costly. Having the right professionals review everything before closing can prevent problems that are much more expensive to fix later.

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    • Mendy J.
      OP
      Investor · NY · Member since 2026 · 121 posts · 42 votes
      4w

      @Gregory Acs 

      my title company is the perfect professional to use... And they did their job

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4w

    that would be pretty simple to get removed..

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  • Mendy J.
    OP
    Investor · NY · Member since 2026 · 121 posts · 42 votes
    4w
    Right if he pays off the previous owners IRS Lien otherwise no…. Current owner is broke and cannot afford that. However, it did not cost me anything
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  • Diana KhanPro Member
    Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 374 posts · 144 votes
    4w

    @Mendy J., this is such a good example of something cash buyers sometimes overlook. A title search and an owner’s title insurance policy are not the same thing. The search tells you what can be found in the records at that time, while the policy may provide protection if a covered title problem from before the purchase shows up later.

    When there is no lender involved, buyers sometimes skip the owner’s policy because nobody is requiring it. But that is also when the decision to protect yourself falls completely on the buyer.

    I’m glad your title company caught this before you closed. A deal can look perfectly fine until one title issue changes everything.

    [email protected]240-266-0291
    1Reply
  • Aiden AvtgisBusiness Member
    Real Estate Agent · Cleveland, OH · Member since 2024 · 35 posts · 15 votes
    4w

    Even on financed deals, owners title insurance is often optional and I've had buyers request to drop it on cash-strapped deals. Buyers rarely have a clear understanding on what title insurance is and how it protects them, both now and in the future.

    1Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    4w

    I recently had a property under contract for a cash purchase that couldn't get title insurance. The property was on an old, unrecorded plat. The deed merely said '1 acre out of..." with no other specification of exactly where the property was. I won't buy without title insurance.

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  • Mendy J.
    OP
    Investor · NY · Member since 2026 · 121 posts · 42 votes
    4w
    For next time you can always make a survey and then you should be able to get Title Insurance
    0Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    4w

    Mendy, this is a great example of why “clear title” and “title insurance” are not the same thing.

    A title search can show what’s recorded and discoverable at the time of closing, but it can’t eliminate every risk. Tax liens, recording errors, undisclosed interests, fraud, or other defects can still surface later. That’s where an owner’s title policy can matter because it may provide coverage or a defense for certain covered title problems that existed before the policy date.

    The IRS lien angle is especially important because federal tax liens can create their own timing and priority issues, and those rules can be very fact-specific. I would not assume a lien tied to a prior owner automatically disappears just because the property changed hands.

    For investors paying cash, skipping title insurance to save a relatively small amount can create a very asymmetric risk. You may save a little upfront, but if a covered defect appears later, the cost to resolve it can be much larger.

    For anyone buying distressed, off-market, auction, or cash deals, I’d treat title work and the owner’s policy as part of the acquisition cost, not an optional extra.

    Happy to connect and share some of our resources that might be helpful!

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    3w

    It’s really very simple.  A title SEARCH displays all liens and encumbrances that (1) have been recorded properly and (2) have not been “missed” by the search. 

    Title Insurance  provides INSURANCE that the title is clear except for liens/encumbrances identified in the policy at a point in time (issuance).  It will provide a defense and payoff if appropriate against any title claim arising from an issue before the policy went into effect.  There are “exceptions” which can be eliminated at extra cost and some that can not be eliminated.  

    Most title company covered claims arise from either inheritance issues or fraud. I’ve been involved in a few where the independent title agency or their employee representing the title issuer were participants in the fraud.  In most cases prison sentences were the result.  It’s amazing how stupid the decisions made are when people get “desperate”.  They take a civil problem (potential bankruptcy, insolvency, etc) and turn it into a criminal case by fraud and theft.  The sentences I’ve seen ranged from   5 to 9 years, and since they were Federal they do most if not all of it.  

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