It’s kind of like car insurance. Let’s say you have an accident and someone else is at fault. You will contact your insurance company and they will pay you. As far as you’re concerned it’s over. The insurance company then goes on and goes after the party at fault or their insurance company.
Same goes with title insurance, as I’ve been explained by an attorney. Yes, the title company makes good on he title flaw, but if there’s someone they can go after to get their money back, then they will. So, if you sign a warranty deed, saying, that there’re no title flaws, then you lied and they might come after you.
Also, keep in mind, that the attorney, that did the title search and insured the title, might not want to report this to their insurance compnay, because their premium might go up. So, maybe they go ahead and pay out of pocket and then go after you, because you signed that warranty deed.
Maybe that would happen, maybe not, but I’ve been in a situation, where I would have been screwed without title insurance, so it’s money well spent for me.
Thanks! When to get the Title Insurance - Posted by Franklin
Posted by Franklin on October 12, 2003 at 01:15:18:
You guys are great!! Thank you all for your advice, and I’ll plan on getting the Title Insurance to make sure the holes are all covered.
Now my question is, when is the best time to talk to the title company to get the insurance - do you guys usually talk to them in the process of a possible investment so that they can do a “pre-check” on the title - or is do you see the title company when you are 100 percent sure you are purchasing the property?
I take it that title companies would not “pre-check” the property for you for free
Title Insurance also revels who owns the property, liens against the property (tax, judgements, mechanical, bail bonds, etc.). You should always get a professional to do your search (attoreny or title company) that way if they leave something off that comes up later, they are on the hook and you have recourse.
As a loan officer I’ve seen a lot come up on title and would never think about buying a property without title being done.
Case in point lady was selling her home, she forgot (well not really forgot just thougth once son went to court all was okay) she had used the home to secure bail for her son. The bailsman had not released the lien and it was 5 years old. He was no longer in business and tracking him down was a dozy, but we managed. He said the lien waiver and about 20 days after the scheduled closed it closed.
Now as an investor had you not done the title search you could have had a unknown lein, the owner could have moved from parts unknown and you would have no clue as to the circumstances regarding the bail bond lien.
Let’s take this in another direction. Suppose a title company or attorney did your serach and didn’t see the bail bond lien. You purchase the property then when you go to sell it the buyer’s title searched revealed the lien. Guess who has to pay for the mistake or do the leg work to get it released? The professional who did the search.
Franklin, I would always get a title search when I buy something. Even though I’ve been in this for quite some time and know how to do my own research I’d rather have the peace of mind to know someone, that’s a professional, has researched it. I would also suggest to buy title insurance whenever possible.
If the title searcher overlooks some kind of claim, then that covers you, should someone come forward to claim part of the property.
For example, it’s not enough to just search the transfers of the particular poperty, but everybody that owned it in a particular time period. Were there outstanding judgements against the owner at the time he/she owned it, years ago? The previous buyer’s searcher may have overlooked a judgement like that. THen you bought it and it wasn’t searched that way, either. Now you’re trying to sell the property and that researcher is more thorough and finds the old judgement - and now you’re liable to get this off the title.
I live in an attorney state so the attonrey is the person I’d call.
As an investor I’d take the time and pay the fee to get it checked once I was sure I wanted it and make my contract, subject to good title/clear title.
As a loan officer, I order title immediatly.
Also once you build up a good closing raito with your attorney and he’s not using outside sources they may give you a discout or not charge for deals that do not close. And he can give you his opionion without getting the insurance.
even, if you only flip the property. Let’s say your buyer buys title insurance and later on a title defect is found, that the title company overlooked. Yes, the title insurance company will pay, but then they will come after you, becaue you signed a warranty deed, claiming, that there are no liens or other encumberances on the property. They will have some major attorney on retainer and you will have to come up with a way to pay your own attorney and defend yourself in court, for something, that you may have had nothing to do with.
Michaela doesn’t that negate the very purpose of having the professional do it? It’s the attorney’s job (in attorney states) to research the title/liens/judgements/ etc and his E/O (erros & omision) insurance policy and closing protection letter (or insured closing letter) covers him IF he overlooks and something. Which is the very point of having the attorney on the hook, he has to pay not you.
Now if the title company does it, I would also suspect they would be on the hook as you signed a paper based on their research and I’m sure they have some kind of E/O insurance policy also provide closing protection letters.
I’ve never heard of a title company or attorney suing a investor or homeowner because they overlooked a lien. I have heard of homeowners suing attorney’s and title companys for negligence. But my state is NC so maybe it’s way different here.
The following is what a closing protection letter does:
A closing protection letter, sometimes referred to as an insured closing letter, is a document issued by title insurance underwriters that sets forth an underwriter’s responsibility for negligence, fraud and errors in closings performed by agents and approved attorneys. It indemnifies the indemnitee against loss or damage arising from a breach of certain fiduciary duties owed by the closing agent to the parties to the transaction. This document is necessary because the agency /principal relationship between an underwriter and a policy issuing agent or approved attorney is limited to the issuance of a policy and does not extend to escrow functions.
If a problem arises out of the closing, through error or fraud, the parties would normally be able to look only to the closing agent for recovery.
in addition to what Michaela said another problem with an attorney’s search and no title insurance is if the attorney dies, or goes bankrupt, his search is worthless and you can’t go back and claim against him.