Title Insurance – Scam or Not!?
Many investors and home owners are convinced that paying for
title insurance is totally unnecessary.
Here, we uncover the hidden truths with real-life examples of
deals, voice our opinion, and let you be the judge.
Title insurance is provided by your local closing agent (either a
Title Company or a Real Estate Attorney depending on your State
or Province) to protect you from the eventuality that it's discovered
you may have a problem with your property after you:
a) have closed and now own it, or
b) have sold it to another party
What kind of problem could arise that you'd need title insurance?
Let's take this example, say for instance that you bought a property
from a family that lived in a home for two years. They had bought it
from another family who'd built the house brand new.
But there's a catch, you as the owner decide to dig up the backyard
and put in a pool. All of a sudden, you find there's a submerged 100
gallon oil tank buried in the backyard and it's leaking into the soil.
You could be charged for the environmental damages and levied a
hefty fine.
Thanks to the investor that had title insurance on this property, they
saved a bundle.
Let's use another example. You buy a property from a local builder
in your area and resell it to a family. The family lives there for three
years then goes to sell the property to another Buyer. At the closing
table, a title search pops up and finds that the title is encumbered by
a mechanics lien registered against the original builder…but time's
now past and that builder's out of business.
The $15,000.00 mechanics lien needs to be cleared so the family can
sell their property.
Thanks to you having had title insurance back when you'd made the
sale to the family in the first place, YOUR title company has to
pay the $15,000.00 because they did not find this in their original title
search when you'd bought the property.
There are two types of title insurance policies to buy in each
transaction: one for the seller and one for the lender.
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So is title insurance a rip-off, a scam, or is it necessary?
Well, title insurance policy claims are low so yes – the insurance companies do win. But you're building a business that must be protected from unknown eventualities – like as if there was a submerged 100 gallon oil tank leeching into the soil that's been unearthed after all these years.
Bottom line, it's better to be safe than sorry…so pay the extra few hundred dollars to be on the safe side. Just one claim against you could quickly burn one heck of a hole in your pocketbook.
Well, title insurance policy claims are low so yes – the insurance companies do win. But you're building a business that must be protected from unknown eventualities – like as if there was a submerged 100 gallon oil tank leeching into the soil that's been unearthed after all these years.
Bottom line, it's better to be safe than sorry…so pay the extra few hundred dollars to be on the safe side. Just one claim against you could quickly burn one heck of a hole in your pocketbook.