Title Insurance - is it worth it?
I'm about to close on a house and my lawyer is pushing me to get title insurance. I looked at the commitment letter from the title insurance company, and there was a very long list of things they wouldn't cover, which they call exceptions. Most of the things on the list are the things that i would be worried about, and are the reason i looked into it in the first place.
Just thought i could get some comments pro or con. it seems like you pay alot of money, but don't get much actual coverage.
I have bought many houses in my life and I always purchase title insurance. I have a situation on some property in the states right now and I am thankful that I purchased the insurance. If your lawyer is advising it, I would follow his advice. I don't know about the title insurance on the island, but I think that things are a little iffy here and it might come in handy. I would suggest that you shop around and ask questions. Hope this helps
Here the deal on title insurance;
Are you using a bank to purchase the property? If so you can be darn sure they have researched the title and it is safe. When the property was last sold did the buyer buy title insurance? If they did you can be sure that if they have not done anything shady since then you are safe. Is the deal for raw land? Maybe then you should consider title insurance, especially in the VI. The land here tends to be owned by families that may of may not have clear title. Children move away, brother dies, remaining on island relatives dont bother to advise all heirs...etc..
There is one exception for raw land. If the owner has split the parcel into smaller lots and has sold others in the past then those others have researched the title. Safe again!
"Are you using a bank to purchase the property? If so you can be darn sure they have researched the title and it is safe. When the property was last sold did the buyer buy title insurance? If they did you can be sure that if they have not done anything shady since then you are safe."
Researchers err. If they didn't, there would only ever be a need to research a title, not to insure it. People make mistakes and if you don't purchase title insurance, you could end up paying big money for someone else's mistakes.
I agree that having Title Insurance is a must, besides it's not all that expensive especially if you plan on keeping your home for a long time. Ask yourself, how much good it will do when someone comes out of the woodwork and claims title to "your' house or property and all you have to say is "OPPS! I relied on the prior owner's title search.
Title Insurance is like any other insurance, it seems like wasted money right up until the time you have to make a claim.
This is a list of things that are not covered by the policy:
1)Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date of the actual closing.
2)Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the title that would be disclosed by an accurate and complete land survey of the land.
3)Rights or claims of parties in possession, and not of record in the public records; liens for labor, services or material or claims to same which are not of record in said records.
4)Matters of adverse possession, rights of parties in possession and other matters not of record which a physical inspection of the property would disclose.
5)Easements or claims of easements, not shown by the public records,
6)any lien, or right to a lien, for service, labor, or material heretofore or hereafter furnished, imposed by law and not shown by public records.
7)Taxes or special assessments which are not shown as existing liens by the public records.
The list goes on and on, and it seems that anything that is not in the public record is not covered. So if a homeowner thinks that they are covered if something unusual comes up, i don't think they are covered.
It basically looks like it is an errors and omissions policy for the actual title searching people, rather than an all encompassing policy for the homeowner.
Here's my take on it.
2) you wouldn't have to worry about any encroachments, because once you get title insurance you should also do a survey of the land, if there is any problem regarding to encroachments this should and will be handle prior to closing.
3)you will most likely want to talk to your attorney regarding this one, because this one is referring to stuff that has not been recorded on the property before you buy it, not something that is there prior to you buying.
6 & 7) this could be property tax liens and or homeowners association liens. all of these should and will be cleared before you take possession of the property.
I use to handle real estate transactions for the attorney that i work for, and we always advise on getting tittle insurance to all our buyers.
This conversation really needs to be with your attorney. We can all offer an opinion, but that's all it is. This is the reason you have a real estate attorney.
I'm sure he or she will also tell you there are two types of title insurance. One, the less expensive, insures the bank's interest (your mortgage), the other, a little more expensive also insures your interest (down payment). I wouldn't even think of not having it.
any attorney will say to get it. it's the easy out for them as well as the title search company. so what "they" are asking us to do is pay a high hourly rate for the professional services of the attorney, and pay a high hourly rate for the title search people for their services. but then they aren't responsible for whether they do a good job, because we have to take out an insurance policy on their work. why don't they have their own policy, and their premiums will be based on their history of competence or lack of.
sorry just venting. The people I'm really mad at are the survey people, who won't update the survey. And just because it is 2 months out of date, (6 months old rather than the 4 months allowed by title company) they charge the full rate for another survey. Advice to anyone buying property is to check with surveyor about charges for an update. You never really know how long it will take until closing.
With a survey you can get the survey exception removed. We have found that different title companies on stx look at things differently, as well. We like to use Island Title. Surveyors are yet another issue. The man we liked, who was really good, and reasonable, retired and left island a few years ago. Ever since, we've had nothing but issues over surveyors, and the price is quite high.
I had title searches done on the properties I have purchased in the USVI, but did not buy title insurance. I looked into what they do and do not insure and there are so many disclaimers that there didn't appear to be anything they would cover should it crop up down the road. An in depth search seemed more reliable. Do your due diligence and then do it again.
If you get a mortgage, you will be required to buy title insurance to protect the mortgage company but the owner's policy is optional. If you pay cash, it's all optional. If there are serious questions about the title, either run fast from the property or make sure you have all the issues fully released and documented before closing. An attorney will always tell you to buy title insurance as an additional protection against them being sued for legal malpractice if something eventually did show up on the title that the title insurance might have covered. it's no $$ out of their pocket to tell you to get the insurance even if they wouldn't buy it themselves if they were buying the same property.
On the mainland, I always bought title insurance for the properties I purchased. The policies there are different.
So, if the attorney tells you to get title insurance so he/she won't be sued if something does come up, doesn't that, kind of by definition, mean there is the possibility (however slight) that something WILL or CAN possibly come up down the road? It may not be likely, but most of us have insurance for things that probably won't happen.
Juanita - the point was that even with title insurance, all the disclaimers rule out coverage for 99% or so of the things that tend to come up on titles. The attorney may fear being sued for something that isn't going to be covered anyway but they didn't mention to you was a possibility that could occur. By advising you to buy insurance, it kind of absolves them of filling you in on all the potential pitfalls leaving it instead up to the title company to provide that professional advice and information.
Home inspectors usually have a contract that states they only report what is obvious to them on the day of inspection. If a problem comes up after you close, an inspector need only argue the problem wasn't apparent to them on the day of inspection. Trying to prove something was, or should have been, apparent to someone else is tough.