I don't understand the benefit of title insurance in this case.

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atikovi
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I don't understand the benefit of title insurance in this case.

Post by atikovi »

Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
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Re: I don't understand the benefit of title insurance in this case.

Post by 123 »

I don't think the insurance industry is going to give anyone a "free ride". If someone makes improvements to their property maybe they would need to get an endorsement to their policy covering the additional potential loss (I'm sure the insurance industry has a (substantial) fee for that, they've got fees for everything).
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Re: I don't understand the benefit of title insurance in this case.

Post by atikovi »

Another scenario. Say you just hold on to the land 10 years and it's worth $200K. If there is an issue, are you still only covered for the original purchase price?
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Re: I don't understand the benefit of title insurance in this case.

Post by 123 »

atikovi wrote: Sun Sep 15, 2019 8:19 pm Another scenario. Say you just hold on to the land 10 years and it's worth $200K. If there is an issue, are you still only covered for the original purchase price?
It likely depends on whether there is an inflation rider included in the policy. Such riders may or may be included in different states and the the limits of the inflation rider (I'm sure it's got a limit) could also vary by state. When in doubt just contact the title insurance company and they can tell you if you need to pay them more money to be fully protected.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

You would have title through adverse possession in all or most states after a certain period of time. Most states bar title suits through the statute of limitations after so many years. Title insurance also provides legal representation in case there is a controversy.

So it's not worthless, but not necessarily worthwhile either. But better to have and not need than need and not have.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

Some states allow a quiet title suit to settle ownership before you start building.
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Re: I don't understand the benefit of title insurance in this case.

Post by pfrank »

atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
Most policies will have an inflation or future use endorsement. The coverage amount automatically increases each year until you reach a limit set in the policy (150 to 200% increase in coverage). Some companies allow you to purchase additional coverage after you build a house on a lot. No clue how much that would cost.
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Re: I don't understand the benefit of title insurance in this case.

Post by johnnyc321 »

willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by El Greco »

willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
I'm with you on this one Willthrill. Seems like writing Title insurance is a fabulous way to make money.
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Re: I don't understand the benefit of title insurance in this case.

Post by atikovi »

Last property I bought was a bank foreclosure on a commercial building. The settlement company was really pressing me to get title insurance (I'm guessing they get a cut) for over $1000. I looked through a stack of paperwork showing previous owners the last 50 years that came in the settlement file and didn't see anything of issue. Plus since the bank was selling, I figured they would still be around if there was a problem years later.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
There should be a way to look up this information. They should be regulated by the state and should have some records about how much of the premiums go towards claims vs pure profits.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Lee_WSP wrote: Mon Sep 16, 2019 10:49 am
willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
There should be a way to look up this information. They should be regulated by the state and should have some records about how much of the premiums go towards claims vs pure profits.
I would very much like to see said information. I have a hard time believing that the risk justifies the premiums I've paid.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

willthrill81 wrote: Mon Sep 16, 2019 11:05 am
Lee_WSP wrote: Mon Sep 16, 2019 10:49 am
willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
There should be a way to look up this information. They should be regulated by the state and should have some records about how much of the premiums go towards claims vs pure profits.
I would very much like to see said information. I have a hard time believing that the risk justifies the premiums I've paid.
Wait, you are continuing to pay these premiums? I thought they were typically a one time payment?
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Lee_WSP wrote: Mon Sep 16, 2019 11:36 am
willthrill81 wrote: Mon Sep 16, 2019 11:05 am
Lee_WSP wrote: Mon Sep 16, 2019 10:49 am
willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am

I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
There should be a way to look up this information. They should be regulated by the state and should have some records about how much of the premiums go towards claims vs pure profits.
I would very much like to see said information. I have a hard time believing that the risk justifies the premiums I've paid.
Wait, you are continuing to pay these premiums? I thought they were typically a one time payment?
Yes, they are. I'm referring to the ones I've paid in the past.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by FIREchief »

willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
I agree. In my area, it is "usual and customary" (i.e. required) for the buyer to buy a title insurance policy for their lender and the seller to buy a title insurance policy for the buyer. I'm guessing this is mostly just veiled profit for the title company. With my last house, the title insurance company disappeared during the great recession (more than a decade after I bought the house). I'm not even sure my state's insurance regulators have a recovery fund for this stuff.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: I don't understand the benefit of title insurance in this case.

Post by bsteiner »

FIREchief wrote: Mon Sep 16, 2019 1:04 pm
willthrill81 wrote: Mon Sep 16, 2019 9:32 am
johnnyc321 wrote: Mon Sep 16, 2019 5:42 am
willthrill81 wrote: Sun Sep 15, 2019 10:19 pm Admittedly, I'm far from an expert on title insurance, but it seems like a first-class racket to me.
I’m a lawyer in Florida and have been involved in a few litigated title insurance matters. Believe me when I say title examiners and agents make a lot of stupid mistakes. Most title agents aren’t lawyers and they learned everything they know about title in a one week course.
I'm not saying that the concept of title insurance is flawed, but the premiums I've paid in relation to my perception of the risk involved seem to be extraordinarily high. I might be completely wrong though.
I agree. In my area, it is "usual and customary" (i.e. required) for the buyer to buy a title insurance policy for their lender and the seller to buy a title insurance policy for the buyer. I'm guessing this is mostly just veiled profit for the title company. With my last house, the title insurance company disappeared during the great recession (more than a decade after I bought the house). I'm not even sure my state's insurance regulators have a recovery fund for this stuff.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
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Re: I don't understand the benefit of title insurance in this case.

Post by FIREchief »

bsteiner wrote: Mon Sep 16, 2019 1:11 pm
FIREchief wrote: Mon Sep 16, 2019 1:04 pm I'm guessing this is mostly just veiled profit for the title company.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
In my state, the recording, etc. is broken out and paid separately. Also, my experience is entirely limited to newer housing developments, where a builder buys a chunk of land and builds a bunch of houses. There really isn't much to search. I understand that there is "some" value added, which is why I chose the word "mostly."
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

FIREchief wrote: Mon Sep 16, 2019 2:03 pm
bsteiner wrote: Mon Sep 16, 2019 1:11 pm
FIREchief wrote: Mon Sep 16, 2019 1:04 pm I'm guessing this is mostly just veiled profit for the title company.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
In my state, the recording, etc. is broken out and paid separately. Also, my experience is entirely limited to newer housing developments, where a builder buys a chunk of land and builds a bunch of houses. There really isn't much to search. I understand that there is "some" value added, which is why I chose the word "mostly."
That's what we experienced with our current home, which was new construction. Before the developer came in, it was just vacant land. There was virtually nothing to search. The $400 we paid was seemingly for a few minutes work.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by bsteiner »

willthrill81 wrote: Mon Sep 16, 2019 2:18 pm
FIREchief wrote: Mon Sep 16, 2019 2:03 pm
bsteiner wrote: Mon Sep 16, 2019 1:11 pm
FIREchief wrote: Mon Sep 16, 2019 1:04 pm I'm guessing this is mostly just veiled profit for the title company.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
In my state, the recording, etc. is broken out and paid separately. Also, my experience is entirely limited to newer housing developments, where a builder buys a chunk of land and builds a bunch of houses. There really isn't much to search. I understand that there is "some" value added, which is why I chose the word "mostly."
That's what we experienced with our current home, which was new construction. Before the developer came in, it was just vacant land. There was virtually nothing to search. The $400 we paid was seemingly for a few minutes work.
How did the developer get title to the land? How did the person who conveyed the property to the developer get title to the land? And so on.

Was there anyone in the chain of title who died? If so, how did the land pass upon that person's death?
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

willthrill81 wrote: Mon Sep 16, 2019 2:18 pm
FIREchief wrote: Mon Sep 16, 2019 2:03 pm
bsteiner wrote: Mon Sep 16, 2019 1:11 pm
FIREchief wrote: Mon Sep 16, 2019 1:04 pm I'm guessing this is mostly just veiled profit for the title company.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
In my state, the recording, etc. is broken out and paid separately. Also, my experience is entirely limited to newer housing developments, where a builder buys a chunk of land and builds a bunch of houses. There really isn't much to search. I understand that there is "some" value added, which is why I chose the word "mostly."
That's what we experienced with our current home, which was new construction. Before the developer came in, it was just vacant land. There was virtually nothing to search. The $400 we paid was seemingly for a few minutes work.
More like at least an hour, maybe two. If it were actual legal services you wouldn't be complaining about that hourly rate.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Lee_WSP wrote: Mon Sep 16, 2019 2:59 pm
willthrill81 wrote: Mon Sep 16, 2019 2:18 pm
FIREchief wrote: Mon Sep 16, 2019 2:03 pm
bsteiner wrote: Mon Sep 16, 2019 1:11 pm
FIREchief wrote: Mon Sep 16, 2019 1:04 pm I'm guessing this is mostly just veiled profit for the title company.
The premium also covers the cost of searching the title, clearing liens, and depending on the state, attending the closing and recording the new deed.
In my state, the recording, etc. is broken out and paid separately. Also, my experience is entirely limited to newer housing developments, where a builder buys a chunk of land and builds a bunch of houses. There really isn't much to search. I understand that there is "some" value added, which is why I chose the word "mostly."
That's what we experienced with our current home, which was new construction. Before the developer came in, it was just vacant land. There was virtually nothing to search. The $400 we paid was seemingly for a few minutes work.
More like at least an hour, maybe two. If it were actual legal services you wouldn't be complaining about that hourly rate.
Like I said, I might be completely wrong. But I doubt that the person actually doing the title search was getting paid remotely $200-$400/hr., even including overhead and taxes.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by WhyNotUs »

atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
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Re: I don't understand the benefit of title insurance in this case.

Post by atikovi »

WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
The final judgment would most likely be you keep the land, but owe the aggrieved party the reasonable market price for the land on some date determined at trial. But really, it would settle for some dollar amount changing hands or the claimant loses. Depends on the state of course, but this is probably what the settlement would be.

Otherwise, the claimant would have to pay for the upgrades to the land if claimant wanted to keep it and was allowed to keep it or if that was the settlement.
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Re: I don't understand the benefit of title insurance in this case.

Post by WhyNotUs »

atikovi wrote: Mon Sep 16, 2019 4:00 pm
WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
That is what title insurance is selling. It does not happen often but it does happen. When you have title insurance and have battled with them over Exclusions, then it is their problem.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

WhyNotUs wrote: Wed Oct 02, 2019 10:02 am
atikovi wrote: Mon Sep 16, 2019 4:00 pm
WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
That is what title insurance is selling. It does not happen often but it does happen. When you have title insurance and have battled with them over Exclusions, then it is their problem.
How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by overthought »

willthrill81 wrote: Wed Oct 02, 2019 4:42 pm
WhyNotUs wrote: Wed Oct 02, 2019 10:02 am
atikovi wrote: Mon Sep 16, 2019 4:00 pm
WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
That is what title insurance is selling. It does not happen often but it does happen. When you have title insurance and have battled with them over Exclusions, then it is their problem.
How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
We once (briefly) had a neighbor who bought a home near us... I say briefly, because buyer skipped the title search and it turned out that the seller who was embroiled in a divorce, had sold the home unilaterally and pocketed money. Unfortunately, he didn't actually hold title to the land, she did (they jointly held the house on that land or some such). The unprotected buyer was sucked into the divorce title dispute and basically became a pawn in a proxy battle between the two sets of divorce lawyers. After several months with no sign of the mess resolving, buyer finally gave up and just walked away from the house, because doing so cost far less than ongoing lawyer's fees.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

overthought wrote: Wed Oct 02, 2019 7:35 pm
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm
WhyNotUs wrote: Wed Oct 02, 2019 10:02 am
atikovi wrote: Mon Sep 16, 2019 4:00 pm
WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm

How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
That is what title insurance is selling. It does not happen often but it does happen. When you have title insurance and have battled with them over Exclusions, then it is their problem.
How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
We once (briefly) had a neighbor who bought a home near us... I say briefly, because buyer skipped the title search and it turned out that the seller who was embroiled in a divorce, had sold the home unilaterally and pocketed money. Unfortunately, he didn't actually hold title to the land, she did (they jointly held the house on that land or some such). The unprotected buyer was sucked into the divorce title dispute and basically became a pawn in a proxy battle between the two sets of divorce lawyers. After several months with no sign of the mess resolving, buyer finally gave up and just walked away from the house, because doing so cost far less than ongoing lawyer's fees.
Thanks. Skipping a title search is obviously a big no-no. That's separate from buying title insurance.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by talzara »

willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
Title insurance has a 0.5% ultimate claim frequency, a $10,000 claim severity, and a 5% loss ratio.

Most claims are for minor title defects. Not owning the land at all is a very rare event.

A $1000 title insurance policy includes $50 of insurance and $950 of fees and commissions. That's why Iowa's government-run title insurer can charge $140, pay for a title abstract, and still make a profit.
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Re: I don't understand the benefit of title insurance in this case.

Post by talzara »

FIREchief wrote: Mon Sep 16, 2019 1:04 pm I agree. In my area, it is "usual and customary" (i.e. required) for the buyer to buy a title insurance policy for their lender and the seller to buy a title insurance policy for the buyer. I'm guessing this is mostly just veiled profit for the title company.
That's outrageous, but most aspects of title insurance are outrageous.

Iowa's government-run title insurer charges $140 for a lender's policy. They charge the same $140 for a lender's and owner's policy.

Here's their rate sheet: http://www.iowafinanceauthority.gov/Fil ... dFile/5117
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Re: I don't understand the benefit of title insurance in this case.

Post by Cycle »

I just paid $565 for $173.5k worth of coverage. I was tempted to do the title investigation myself, but chickened out. Many things in the real estate world seem like a racket ripe for disruption.

I had an agent who has refunded me 50% of his commission on two previous transactions. He disappeared and didn't answer my calls on my last transaction, so my new buyers agent is getting 2.75% for showing me 1 property.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

Cycle wrote: Wed Oct 02, 2019 8:51 pm I just paid $565 for $173.5k worth of coverage. I was tempted to do the title investigation myself, but chickened out. Many things in the real estate world seem like a racket ripe for disruption.

I had an agent who has refunded me 50% of his commission on two previous transactions. He disappeared and didn't answer my calls on my last transaction, so my new buyers agent is getting 2.75% for showing me 1 property.
You could go with a Redfin agent. Not as good as 50% rebate, but better than zero kickback.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

talzara wrote: Wed Oct 02, 2019 8:36 pm
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
Title insurance has a 0.5% ultimate claim frequency, a $10,000 claim severity, and a 5% loss ratio.

Most claims are for minor title defects. Not owning the land at all is a very rare event.

A $1000 title insurance policy includes $50 of insurance and $950 of fees and commissions. That's why Iowa's government-run title insurer can charge $140, pay for a title abstract, and still make a profit.
Thanks. That seems to coincide with my observations. Do you happen to have a link to data on this?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by Cycle »

Lee_WSP wrote: Wed Oct 02, 2019 10:06 pm
Cycle wrote: Wed Oct 02, 2019 8:51 pm I just paid $565 for $173.5k worth of coverage. I was tempted to do the title investigation myself, but chickened out. Many things in the real estate world seem like a racket ripe for disruption.

I had an agent who has refunded me 50% of his commission on two previous transactions. He disappeared and didn't answer my calls on my last transaction, so my new buyers agent is getting 2.75% for showing me 1 property.
You could go with a Redfin agent. Not as good as 50% rebate, but better than zero kickback.
Only if the property is over 200k, I did use a redfin agent and attempted to get a rebate.
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Re: I don't understand the benefit of title insurance in this case.

Post by smitcat »

willthrill81 wrote: Wed Oct 02, 2019 4:42 pm
WhyNotUs wrote: Wed Oct 02, 2019 10:02 am
atikovi wrote: Mon Sep 16, 2019 4:00 pm
WhyNotUs wrote: Mon Sep 16, 2019 3:51 pm
atikovi wrote: Sun Sep 15, 2019 7:46 pm Say you buy a empty lot for $100K, then you build a $500K house on it. If there is a future title issue, seems like you're only covered for the $100K you paid for the property. What about the $500K you spend on the house?
How would it work for you if you built a $500k house and the land belonged to another party?
Why would you build a $500K house on land you don't own? That's just stupid.
That is what title insurance is selling. It does not happen often but it does happen. When you have title insurance and have battled with them over Exclusions, then it is their problem.
How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
"How often does it happen?"
We know of two people who have had title issues - one involved a 'right of way' which surfaced a few years later and one had a 'covenant' on outbuildings and property coverage. I have no knowledge of anyone who has been challenged on property ownership outright.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

willthrill81 wrote: Thu Oct 03, 2019 12:28 am
talzara wrote: Wed Oct 02, 2019 8:36 pm
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
Title insurance has a 0.5% ultimate claim frequency, a $10,000 claim severity, and a 5% loss ratio.

Most claims are for minor title defects. Not owning the land at all is a very rare event.

A $1000 title insurance policy includes $50 of insurance and $950 of fees and commissions. That's why Iowa's government-run title insurer can charge $140, pay for a title abstract, and still make a profit.
Thanks. That seems to coincide with my observations. Do you happen to have a link to data on this?
There's also a small cost for title search & due diligence, but yeah, it's a racket. But good luck getting rid of it in the near future.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Lee_WSP wrote: Thu Oct 03, 2019 9:07 am
willthrill81 wrote: Thu Oct 03, 2019 12:28 am
talzara wrote: Wed Oct 02, 2019 8:36 pm
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
Title insurance has a 0.5% ultimate claim frequency, a $10,000 claim severity, and a 5% loss ratio.

Most claims are for minor title defects. Not owning the land at all is a very rare event.

A $1000 title insurance policy includes $50 of insurance and $950 of fees and commissions. That's why Iowa's government-run title insurer can charge $140, pay for a title abstract, and still make a profit.
Thanks. That seems to coincide with my observations. Do you happen to have a link to data on this?
There's also a small cost for title search & due diligence, but yeah, it's a racket. But good luck getting rid of it in the near future.
I've suspected as much for a long time.

Our plan is to avoid it by not moving and/or buying any property for a long time.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

smitcat wrote: Thu Oct 03, 2019 7:50 am
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
"How often does it happen?"
We know of two people who have had title issues - one involved a 'right of way' which surfaced a few years later and one had a 'covenant' on outbuildings and property coverage. I have no knowledge of anyone who has been challenged on property ownership outright.
I wonder if title insurance had any bearing at all on either of those issues, especially the second.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by smitcat »

willthrill81 wrote: Thu Oct 03, 2019 9:54 am
smitcat wrote: Thu Oct 03, 2019 7:50 am
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
"How often does it happen?"
We know of two people who have had title issues - one involved a 'right of way' which surfaced a few years later and one had a 'covenant' on outbuildings and property coverage. I have no knowledge of anyone who has been challenged on property ownership outright.
I wonder if title insurance had any bearing at all on either of those issues, especially the second.
I know that the title insurance was utilized to handle the issue through a lawyer who specialized in that stuff - it became pretty important when they were selling and moving to NC.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

smitcat wrote: Thu Oct 03, 2019 9:58 am
willthrill81 wrote: Thu Oct 03, 2019 9:54 am
smitcat wrote: Thu Oct 03, 2019 7:50 am
willthrill81 wrote: Wed Oct 02, 2019 4:42 pm How often does it happen? I cannot locate any statistics on its occurrence, and I haven't even heard of a rumor of anyone who experienced title problems of any sort on a residential dwelling.
"How often does it happen?"
We know of two people who have had title issues - one involved a 'right of way' which surfaced a few years later and one had a 'covenant' on outbuildings and property coverage. I have no knowledge of anyone who has been challenged on property ownership outright.
I wonder if title insurance had any bearing at all on either of those issues, especially the second.
I know that the title insurance was utilized to handle the issue through a lawyer who specialized in that stuff - it became pretty important when they were selling and moving to NC.
So even in that circumstance, they could have just hired an attorney out of pocket instead. It might have been more costly than what they paid for the title insurance, but it seems very unlikely to have been financially detrimental.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

willthrill81 wrote: Thu Oct 03, 2019 9:54 am So even in that circumstance, they could have just hired an attorney out of pocket instead. It might have been more costly than what they paid for the title insurance, but it seems very unlikely to have been financially detrimental.
Not necessarily. 2 hours of an experienced lawyer's time is going to run $1k.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

Lee_WSP wrote: Thu Oct 03, 2019 9:59 am
willthrill81 wrote: Thu Oct 03, 2019 9:54 am So even in that circumstance, they could have just hired an attorney out of pocket instead. It might have been more costly than what they paid for the title insurance, but it seems very unlikely to have been financially detrimental.
Not necessarily. 2 hours of an experienced lawyer's time is going to run $1k.
So how many hours (e.g. a range) are we talking about for a right-of-way issue? 2? 20? 200? I don't know.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by smitcat »

willthrill81 wrote: Thu Oct 03, 2019 10:11 am
Lee_WSP wrote: Thu Oct 03, 2019 9:59 am
willthrill81 wrote: Thu Oct 03, 2019 9:54 am So even in that circumstance, they could have just hired an attorney out of pocket instead. It might have been more costly than what they paid for the title insurance, but it seems very unlikely to have been financially detrimental.
Not necessarily. 2 hours of an experienced lawyer's time is going to run $1k.
So how many hours (e.g. a range) are we talking about for a right-of-way issue? 2? 20? 200? I don't know.
I have no way of knowing the hours as it was my daughters friend - it lasted a bit over 2 months and nearly lost their home sale due to clearing it up prior to the sale.
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Re: I don't understand the benefit of title insurance in this case.

Post by Lee_WSP »

smitcat wrote: Thu Oct 03, 2019 10:14 am
willthrill81 wrote: Thu Oct 03, 2019 10:11 am
Lee_WSP wrote: Thu Oct 03, 2019 9:59 am
willthrill81 wrote: Thu Oct 03, 2019 9:54 am So even in that circumstance, they could have just hired an attorney out of pocket instead. It might have been more costly than what they paid for the title insurance, but it seems very unlikely to have been financially detrimental.
Not necessarily. 2 hours of an experienced lawyer's time is going to run $1k.
So how many hours (e.g. a range) are we talking about for a right-of-way issue? 2? 20? 200? I don't know.
I have no way of knowing the hours as it was my daughters friend - it lasted a bit over 2 months and nearly lost their home sale due to clearing it up prior to the sale.
That's a legal bill in the thousands and possibly tens of thousands. At least 2 hours were billed each month and most likely at least 10 hours per month. Extra for court appearances.

No idea of the breakdown between lower paralegal rates & junior associate rates vs. law partner rates, but 2 months to clear it up is more than 2 hours of time. Less than 100.
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Re: I don't understand the benefit of title insurance in this case.

Post by talzara »

willthrill81 wrote: Thu Oct 03, 2019 12:28 am Thanks. That seems to coincide with my observations. Do you happen to have a link to data on this?
Here are the loss ratios for:
The loss ratio has been about 5% since the 1980s. Loss ratios were temporarily elevated due to the 2008 housing crisis, but they have come back down to the usual 5%.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

talzara wrote: Thu Oct 03, 2019 10:19 am
willthrill81 wrote: Thu Oct 03, 2019 12:28 am Thanks. That seems to coincide with my observations. Do you happen to have a link to data on this?
Here are the loss ratios for:
The loss ratio has been about 5% since the 1980s. Loss ratios were temporarily elevated due to the 2008 housing crisis, but they have come back down to the usual 5%.
Thanks.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: I don't understand the benefit of title insurance in this case.

Post by WhyNotUs »

There are two separate issues: Is title insurance over-priced? Yes. Is title insurance a wise investment? Yes, in most cases. If you purchase it without going over the Exclusions and getting title company to remove as many as possible then you may not be buying what you think you are buying.

There are situations in which ownership is disputed. I have dealt with two in my professional life. One involved a split estate issue and the other a squatter claiming title. Other iterations I am familiar with include sales of parcels of land that had previously been combined and subdivided outside of the process of the local jurisdiction.
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Re: I don't understand the benefit of title insurance in this case.

Post by willthrill81 »

WhyNotUs wrote: Thu Oct 03, 2019 11:28 am There are situations in which ownership is disputed. I have dealt with two in my professional life. One involved a split estate issue and the other a squatter claiming title.
Does title insurance address squatters claiming title after the purchase of the property and the title insurance?

I've heard that there is an increasingly rampant problem with squatters erroneously filing claims for ownership of property at their local courthouse and then informing the police that they 'own' the property. Police then say that it's a property dispute and that they cannot evict the squatters, and it turns into a big legal battle. I haven't heard anyone claim that having title insurance does anything to resolve this problem, but it perhaps it does or might.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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