Title Insurance for a new home?

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retire14
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Title Insurance for a new home?

Post by retire14 »

Hi:
I am buying a brand new home in an existing development. Do I really need tittle insurance or can I do without?
Last edited by retire14 on Wed Jul 22, 2015 9:45 am, edited 1 time in total.
denovo
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Re: Tittle Insurance for a new home?

Post by denovo »

Of course you do.
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YttriumNitrate
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Re: Title Insurance for a new home?

Post by YttriumNitrate »

The land was owned by someone before the developer bought it and partitioned it.
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cheese_breath
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Re: Title Insurance for a new home?

Post by cheese_breath »

If you have a mortgage the lender will insist on it. If you own it outright and want to take the risk that something in the property's history could cause you to lose the whole thing, then no.
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dolphinsaremammals
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Re: Title Insurance for a new home?

Post by dolphinsaremammals »

cheese_breath wrote:If you have a mortgage the lender will insist on it. If you own it outright and want to take the risk that something in the property's history could cause you to lose the whole thing, then no.
The insurance for the lender has zero protection for the OP. He or she needs a separate title insurance policy for that.
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cheese_breath
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Re: Title Insurance for a new home?

Post by cheese_breath »

dolphinsaremammals wrote:
cheese_breath wrote:If you have a mortgage the lender will insist on it. If you own it outright and want to take the risk that something in the property's history could cause you to lose the whole thing, then no.
The insurance for the lender has zero protection for the OP. He or she needs a separate title insurance policy for that.
Good point.
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sport
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Re: Title Insurance for a new home?

Post by sport »

dolphinsaremammals wrote:
cheese_breath wrote:If you have a mortgage the lender will insist on it. If you own it outright and want to take the risk that something in the property's history could cause you to lose the whole thing, then no.
The insurance for the lender has zero protection for the OP. He or she needs a separate title insurance policy for that.
Please explain. My understanding is that the insurance is for the title. I own the title, while the bank has lent money secured by the title. If there is a problem with the title, it is my problem, no? I can understand why the bank insists on me having insurance, but isn't it still my insurance?
cadreamer2015
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Re: Title Insurance for a new home?

Post by cadreamer2015 »

Like any insurance decision, you should buy insurance to protect you from a loss you can't afford to bear. If you have enough assets that the loss of your property would not be a significant loss, then you don't need to buy title insurance. Owners title insurance protects you against the small, but expensive, risk that you don't actually own the property you think you own, because of some legal claim which is unknown to you at the time of the purchase, but which arises after the transaction.
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obgraham
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Re: Title Insurance for a new home?

Post by obgraham »

I think title insurance is a ripoff promulgated by the banks and real estate businesses. It's cash poured down a rat hole.

Yes, you have to have it. But does anyone know anybody who has ever collected cash on their title insurance? Thought not.
tim1999
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Re: Title Insurance for a new home?

Post by tim1999 »

dolphinsaremammals wrote:
cheese_breath wrote:If you have a mortgage the lender will insist on it. If you own it outright and want to take the risk that something in the property's history could cause you to lose the whole thing, then no.
The insurance for the lender has zero protection for the OP. He or she needs a separate title insurance policy for that.
Yes, if the OP wanted to be personally covered he would have to buy an "Owner's Policy." This is usually relatively cheap when you are already getting a Lender's policy. I was quoted $200 on the last house I bought.
tim1999
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Re: Title Insurance for a new home?

Post by tim1999 »

obgraham wrote:I think title insurance is a ripoff promulgated by the banks and real estate businesses. It's cash poured down a rat hole.

Yes, you have to have it. But does anyone know anybody who has ever collected cash on their title insurance? Thought not.
I generally agree. I have attempted to collect on title insurance policies 4 times at work for company-owned properties and each time they denied the claim due to the exclusions, so we had to solve the problem at our expense. In fact, the title insurance company rep once said to me, meant as a joke, almost half-serious, "Don't you know we just take the money and don't pay out?"
Gropes & Ray
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Re: Title Insurance for a new home?

Post by Gropes & Ray »

After the title insurance company searches the title and adds exclusions to the policy, you are actually insured against very little. Sometimes there can be a bad survey or the title searcher missed something, but that's about it.
cadreamer2015
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Re: Title Insurance for a new home?

Post by cadreamer2015 »

Yes, I know someone who had a title issue (property line, I think) which was addressed through the title insurance policy.
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ralph124cf
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Re: Title Insurance for a new home?

Post by ralph124cf »

obgraham wrote:I think title insurance is a ripoff promulgated by the banks and real estate businesses. It's cash poured down a rat hole.

Yes, you have to have it. But does anyone know anybody who has ever collected cash on their title insurance? Thought not.
A few years ago, I went to get a HELOC. The mortgage company discovered a previous home equity loan that had never been cleared. It appears that it was paid off, but still showing up because it was never formally released.

The entity that had the paid off loan would not talk to me, because I was not a party to the loan.

My title insurance company did not pay me anything, but clearing up the title saved me a lot of grief. On the other hand, if they had done their job correctly in the first place, they would have found the problem before I bought the house.

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sport
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Re: Title Insurance for a new home?

Post by sport »

A year or two after I bought my new house from the builder, I found an extra unexplained item on my real estate tax bill. It was more than $600. I checked with the county and it has something to do with taxes not paid by the builder. When I asked the builder about it, he reimbursed me for the expense. Other homeowners in the development were also reimbursed if they asked. I do not know what happened to those who did not ask. I don't know if the title insurance would have covered that.
J295
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Re: Title Insurance for a new home?

Post by J295 »

If you are not getting a loan and never intend to mortgage the property then, at least in our state, you are no required by law to have title insurance. That was our case, and we did obtain title insurance. We also obtained a survey, which alerted us to an issue that we handled in connection with the closing.

Generally, I think one should obtain title insurance. If you don't, be mindful that: (1) you may have unmarketable title (can't sell the property in its current title condition), (2) there may be liens or other encumbrances or title defects that could cause you to lose the entire value of the property. Note too that the title commitment may show defects that you will want to have cleared up prior to closing (i.e. put it upon the seller to fix prior to closing).
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retire14
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Re: Title Insurance for a new home?

Post by retire14 »

Thank you for all your replies. I do not have a lender, so it is optional in my state as well.
But , what a scam...I got a quote online from a company some of the Bogleheads used as follows:

Basic Rate: 1600
Title Search 290
Courrier 35
Deed Prep 95
Settlement Fee 560

For a whopping $2579 on a 650K house. The house is in Va, built by Stanley Martin Homes, which is a large builder which has many subdivisions throughout Va and NC.

Based on what I gather from all your replies, though, even if it is basically a scam, but I do not have choice if I want to protect myself. I guess I will just shop around for a best quite and then swallow it. Arrrghhh!!

Any recommendation for a company?
Random Poster
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Re: Title Insurance for a new home?

Post by Random Poster »

retire14 wrote:Any recommendation for a company?
If you are handy with the public records (or know of a title attorney who is and who'd be willing to do a search for a few hundred dollars), consider running title yourself and see what's out there. You probably don't need to go back in title beyond 25 or 50 years. If your search turns up some questions or discrepancies, then consider getting the title insurance.
jdb
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Re: Title Insurance for a new home?

Post by jdb »

Title insurance tends to be overpriced and rarely are claims asserted but I would recommend obtaining since helps to have it when you eventually sell the house. It is your written guaranty of good title to the property.
tim1999
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Re: Title Insurance for a new home?

Post by tim1999 »

retire14 wrote: But , what a scam...I got a quote online from a company some of the Bogleheads used as follows:

Basic Rate: 1600
Title Search 290
Courrier 35
Deed Prep 95
Settlement Fee 560

For a whopping $2579 on a 650K house. The house is in Va, built by Stanley Martin Homes, which is a large builder which has many subdivisions throughout Va and NC.
That actually sounds pretty good for a $650k house as far as title insurance goes. I paid around $1,700 on lender's and owner's title insurance (including the search and all other fees) on a house that cost less than half of yours. The owner's coverage was only about $200 of the total.
georgewall42
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Re: Title Insurance for a new home?

Post by georgewall42 »

When you say or hear title insurance, you need to specify whether it's a lender's policy or owner's.

If you're taking out a mortgage, you will have to pay lender's title insurance, which, as the name implies, protects the lender. And, if you refinance, you get to pay it again. Yes, you get to pay for something that that doesn't directly help you. Sometimes, life is unfair.

When buying a house, it's always a good idea to have owner's title insurance, which protects your equity in the home. It was just a few years ago that the robo-signing scandal broke, so there's a nonzero chance of your property having some sort of title issue. As with any insurance, the "winner" is usually the insurance company; that's how insurance companies stay in business. However, at the end of the day, given the total cost of home ownership, it's short money in the long run that can protect you from a problem that could cost you a lot of money to correct otherwise. Considering it's a one time payment for insurance where the protection offered actually increases over time, buying it is hardly the worst choice to make.
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Re: Title Insurance for a new home?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (title insurance).

Here's some background info (from nolo.com): Title Insurance: Why a Home Buyer Needs It
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