Title Insurance: Don’t Leave Home Without it - Spring 2017
A more accurate title to this newsletter probably would be “Title Insurance: Don’t Buy a Home Without it,” but I figured I would use the “Don’t leave home without it” slogan originally coined by American Express, since they have been mildly successful in business.
OverviewIf you have bought property (i.e. a house) and took out a mortgage in doing so, then you probably noticed a fee for Title Insurance on your Closing Disclosure (a/k/a "CD") or HUD (the former form of CD). In this newsletter, I am going to explain the different types of title insurance and what they cover. Hopefully, this newsletter will give a lot of property owners a sigh of relief. However, it might also cause a property owner or two to call us immediately.
Whether you like it or not - Lender's Title Insurance:Unless you're NFL Superstar Tom Brady and have enough money to pay straight cash at closing, you purchased lender's title insurance on your mortgage. Any right-minded lender will require the buyer of property to do so. This loan policy protects the lender's interest against any title problems in the property up to the amount of the mortgage.
When I say a "title issue," I am referring to any liens, encumbrances or defects in the title to your property. Title issues are typically spotted prior to closing by a title examiner that is hired to do a title search. If anything does pop up during this title search, the seller is required to rectify these title issues prior to closing - as they have represented that clear title to the property will be delivered at closing.
Your lender is going to require you to buy lender's title insurance or else the lender will be unwilling to wire you that huge sum of money needed to buy your dream home. Don't bother fighting them on this - it is non-negotiable.
Keep in mind, the lender is giving (I use the word "giving" VERY loosely) you money because you are buying something of value that the lender wants to stay valuable, in case the lender has to turn around and foreclose on your dream home. Therefore, they are not taking any chances that a title issue may turn up and all of a sudden their interest in your property is not quite so valuable anymore.
Freedom, baby! - Owner's Title Insurance:The infamous date of October 3, 2015 was what many real estate professionals thought was to be worse than the apocalypse. However, much like New Years Eve of 1999, the world kept on spinning. On this date, banking regulations changed with the intent of helping the consumer. One of the main changes was that it had to be disclosed to a buyer on the CD (remember the CD? I mentioned it earlier - go back and re-read the introduction) that owner's title insurance is optional. However, even though owner's title insurance is technically optionally, the prudent buyer should still shell out the extra couple bucks if he or she wants to sleep soundly at night (it only requires a one time payment at closing, never again).
Much like the loan policy (remember the loan policy? C'mon, go back and re-read that section too), an owner's title insurance policy protects against title issues. However, the owner's policy protects against the additional equity in the property, above and beyond the amount borrowed from the lender.
An owner's policy is a one-time payment that will help you sleep sounder than any memory mattress or white noise machine. Also note that if you are as rich as Tom Brady and able to pay cash at closing, you still should consider purchasing an owner's title insurance policy.
Bedtime - Conclusion:You did it! You read the whole thing (almost)! If you own property and do not know if you have an owner's title insurance policy, contact us immediately. Our office will not only be able to tell you if you are covered, but we can also write the insurance policy for you. So you can get back to falling asleep with the TV and lights on.