Title insurance policy

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nydoc
Posts: 108
Joined: Mon Jul 22, 2019 5:57 pm

Title insurance policy

Post by nydoc » Tue May 05, 2020 8:45 pm

Hello:
We are about to purchase a property in NY state. I will have to buy a lender's title insurance policy. But do I must buy owner's title insurance now? Can it be purchased in future after closing? Can i totally skip it?
Thanks.

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Ralph Furley
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Re: Title insurance policy

Post by Ralph Furley » Tue May 05, 2020 8:58 pm

Is your transaction settlement being conducted by an attorney or by the title insurance company? Some states use attorneys and some states use title companies. Ask that settlement service provider. Not sure if it can be purchased after closing, though probably. I would never purchase real estate without an owner's title insurance policy in place. The lender's policy only protects the lender up to the amount of the loan. The owner's policy protects the new owner up to the full amount.

Congrats on your new property.

123
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Re: Title insurance policy

Post by 123 » Tue May 05, 2020 9:01 pm

You can skip the owner's title insurance as long as you don't mind losing everything you have paid for the property due to a defect in the chain of title that allows someone else to sell the property out from underneath you. It depends on how large a role the equity in the home will play in your financial future. If you can afford to lose the home through no fault of your own you can get by without it.

The lender is smart enough to protect their interest in the property with a lender's title insurance policy. Maybe you should be at least as smart as they are.
The closest helping hand is at the end of your own arm.

Topic Author
nydoc
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Re: Title insurance policy

Post by nydoc » Tue May 05, 2020 9:07 pm

I will purchase it. However, I want to buy it directly (from Radian or something similar) and not from attorney's title handling and insurance company. No attorney in this area is willing to work without a title insurance company they want to work with. Obviously they get a big commission from the title insurance company. With this in mind, I can not delay buying the lender's title policy but was wondering if I can buy owners policy separately on my own?
Last edited by nydoc on Tue May 05, 2020 9:15 pm, edited 1 time in total.

invest4
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Re: Title insurance policy

Post by invest4 » Tue May 05, 2020 9:11 pm

The cost is eye opening, but I too became convinced it was grudgingly worth the price of admission.

bsteiner
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Location: NYC/NJ/FL

Re: Title insurance policy

Post by bsteiner » Tue May 05, 2020 9:43 pm

nydoc wrote:
Tue May 05, 2020 9:07 pm
I will purchase it. However, I want to buy it directly (from Radian or something similar) and not from attorney's title handling and insurance company. No attorney in this area is willing to work without a title insurance company they want to work with. Obviously they get a big commission from the title insurance company. With this in mind, I can not delay buying the lender's title policy but was wondering if I can buy owners policy separately on my own?
We don't get commissions from title companies. If I recall correctly lawyers used to get a 10% commission until Ethics Opinion 351 came out in 1974: https://nysba.org/ethics-opinion-351/.

Our real estate lawyers tend to have their favorite title companies based on the service they provide, including having in-house counsel to speak with when unusual issues arise.

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grabiner
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Re: Title insurance policy

Post by grabiner » Tue May 05, 2020 9:45 pm

nydoc wrote:
Tue May 05, 2020 9:07 pm
With this in mind, I can not delay buying the lender's title policy but was wondering if I can buy owners policy separately on my own?
While you could do this, it is less expensive to get both title policies at once from the same insurer, because only one title search is required.
Wiki David Grabiner

lstone19
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Re: Title insurance policy

Post by lstone19 » Tue May 05, 2020 11:35 pm

nydoc wrote:
Tue May 05, 2020 9:07 pm
No attorney in this area is willing to work without a title insurance company they want to work with. Obviously they get a big commission from the title insurance company.
I find this line of thinking that so many people have to be interesting. They think they must be getting a commission or a kickback or something else. It couldn't possibly be because they find it far easier to work with one company where they know the people and if there's a last minute problem they know who to call and can get quick service. Would you prefer the attorney work with the company of the week where when they calls gets asked who they are, gets put on hold and shuffled to someone else and then told it will take a few days or the one where when they call gets right to the person needed and gets things done in the time they need. When you're sitting at the closing and someone discovers an error in the paperwork, maybe a misspelling, do you want to be told things needs to be put off two days while the paperwork is redone or would you rather have the corrected paperwork in 15 minutes (during which you're signing the other papers so no real delay).

CurlyDave
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Re: Title insurance policy

Post by CurlyDave » Wed May 06, 2020 12:00 am

123 wrote:
Tue May 05, 2020 9:01 pm
You can skip the owner's title insurance as long as you don't mind losing everything you have paid for the property due to a defect in the chain of title that allows someone else to sell the property out from underneath you. It depends on how large a role the equity in the home will play in your financial future. If you can afford to lose the home through no fault of your own you can get by without it.

The lender is smart enough to protect their interest in the property with a lender's title insurance policy. Maybe you should be at least as smart as they are.
Note that they are also smart enough to make someone else pay for the policy...

lstone19
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Re: Title insurance policy

Post by lstone19 » Wed May 06, 2020 12:04 am

CurlyDave wrote:
Wed May 06, 2020 12:00 am
123 wrote:
Tue May 05, 2020 9:01 pm
The lender is smart enough to protect their interest in the property with a lender's title insurance policy. Maybe you should be at least as smart as they are.
Note that they are also smart enough to make someone else pay for the policy...
You pay for it (and everything else) one way or another. Whether the lender's title policy is a charge specifically called out on the closing statement as paid for by you or built into the loan fees, you still pay for it just like in some areas, some fees are customarily paid by the seller but in the end, the buyer is paying for it since it is just built into the sales price (whether you realize it or not).

Luckywon
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Re: Title insurance policy

Post by Luckywon » Wed May 06, 2020 1:04 am

Has anyone here ever seen a payout from a title insurance policy?

CurlyDave
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Re: Title insurance policy

Post by CurlyDave » Wed May 06, 2020 1:05 am

lstone19 wrote:
Wed May 06, 2020 12:04 am
CurlyDave wrote:
Wed May 06, 2020 12:00 am
123 wrote:
Tue May 05, 2020 9:01 pm
The lender is smart enough to protect their interest in the property with a lender's title insurance policy. Maybe you should be at least as smart as they are.
Note that they are also smart enough to make someone else pay for the policy...
You pay for it (and everything else) one way or another. Whether the lender's title policy is a charge specifically called out on the closing statement as paid for by you or built into the loan fees, you still pay for it just like in some areas, some fees are customarily paid by the seller but in the end, the buyer is paying for it since it is just built into the sales price (whether you realize it or not).
Who said: "The farmer is the only man in America who buys everything at retail, sells everything at wholesale, and pays the freight both ways" ?

talzara
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Re: Title insurance policy

Post by talzara » Wed May 06, 2020 2:25 pm

Luckywon wrote:
Wed May 06, 2020 1:04 am
Has anyone here ever seen a payout from a title insurance policy?
Title insurance has a claims frequency of about 1% per policy. The average house is sold every 10 years, so the annual claims frequency is about 0.1%. However, most claims are small errors that can be resolved by filing a corrected document. The title insurer only pays for the cost of filing, but it still gets counted as a claim. About 5% of claims are true claims where the title insurer incurs a substantial loss.

Therefore, the annual true claims frequency for title insurance is about 0.005%.

This number varies a lot by state. Some states have much cleaner titles than other states.

nolesrule
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Re: Title insurance policy

Post by nolesrule » Wed May 06, 2020 3:02 pm

The Owner's Title Insurance Policy is cheap and a one-time purchase unlike the lender's policy which has to be purchased with every mortgage refinance. if there was a commission, it wouldn't be much.

Luckywon
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Joined: Tue Mar 28, 2017 10:33 am

Re: Title insurance policy

Post by Luckywon » Wed May 06, 2020 3:10 pm

talzara wrote:
Wed May 06, 2020 2:25 pm
Luckywon wrote:
Wed May 06, 2020 1:04 am
Has anyone here ever seen a payout from a title insurance policy?
Title insurance has a claims frequency of about 1% per policy. The average house is sold every 10 years, so the annual claims frequency is about 0.1%. However, most claims are small errors that can be resolved by filing a corrected document. The title insurer only pays for the cost of filing, but it still gets counted as a claim. About 5% of claims are true claims where the title insurer incurs a substantial loss.

Therefore, the annual true claims frequency for title insurance is about 0.005%.

This number varies a lot by state. Some states have much cleaner titles th6an other states.
Interesting info. I just did some quick online research and found that a buyer's title policy in my location for a home is about 0.2% of property value. It seems from the figures you give above that the profit margin for title insurance is very high. I'm surprised it's not a more competitive market with lower prices. Is there some sort of monopoly going on?

bobolinx
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Re: Title insurance policy

Post by bobolinx » Wed May 06, 2020 3:32 pm

Unfortunately you have stumbled on another of those "transaction fees" in real estate sales and purchases. Here is an example of why I was glad for title insurance. There was a dispute about my deed from the buyer's lawyers when I was selling. He did not note that I had insurance and was going to charge me a certain sum to "verify or investigate". After going meticulously through my paper work from 20 years, I found the insurer. End of issue, closing proceeded until the next "issue". Everyone wants their fee during a sale. Be prepared and pay the smaller fees unless you want to contend with many issues later. My fatalistic attitude was that I was working, had an ill family member and had no time to contest professionals who have set the rules to their advantage.

talzara
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Joined: Thu Feb 12, 2009 7:40 pm

Re: Title insurance policy

Post by talzara » Wed May 06, 2020 5:45 pm

Luckywon wrote:
Wed May 06, 2020 3:10 pm
Interesting info. I just did some quick online research and found that a buyer's title policy in my location for a home is about 0.2% of property value. It seems from the figures you give above that the profit margin for title insurance is very high. I'm surprised it's not a more competitive market with lower prices. Is there some sort of monopoly going on?
Title insurance has a profit margin of about 5%. It's a competitive industry, but it works to increase premiums rather than decrease them.

Most homebuyers do not select their own title insurance company. Instead, the title agent will select the title insurance company that's paying the highest commission. Therefore, title insurance companies compete by increasing commissions, not by lowering prices.

Typically, 85% of the premium goes to convincing agents to select the company. This includes commissions, sales, marketing, and other promotional activities. 5% goes to pay claims, 5% is used to operate the business, and 5% remains as the profit.

Title insurance is very inefficient compared to other lines of insurance. Auto insurance has an industrywide loss ratio of about 65%.

Luckywon
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Joined: Tue Mar 28, 2017 10:33 am

Re: Title insurance policy

Post by Luckywon » Thu May 07, 2020 1:40 am

talzara wrote:
Wed May 06, 2020 5:45 pm
Luckywon wrote:
Wed May 06, 2020 3:10 pm
Interesting info. I just did some quick online research and found that a buyer's title policy in my location for a home is about 0.2% of property value. It seems from the figures you give above that the profit margin for title insurance is very high. I'm surprised it's not a more competitive market with lower prices. Is there some sort of monopoly going on?
Title insurance has a profit margin of about 5%. It's a competitive industry, but it works to increase premiums rather than decrease them.

Most homebuyers do not select their own title insurance company. Instead, the title agent will select the title insurance company that's paying the highest commission. Therefore, title insurance companies compete by increasing commissions, not by lowering prices.

Typically, 85% of the premium goes to convincing agents to select the company. This includes commissions, sales, marketing, and other promotional activities. 5% goes to pay claims, 5% is used to operate the business, and 5% remains as the profit.

Title insurance is very inefficient compared to other lines of insurance. Auto insurance has an industrywide loss ratio of about 65%.
Absolutely fascinating info, thanks for posting. "Inefficient" is such a charitable term. Sounds more like racketeering to me........

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