Should we buy Title Insurance for our new house in Hadley?

[graciegirl]

I know that there has been a previous discussion about Title Insurance and I also want to point out that Sweetie and I are NOT property virgins. (If you don't watch HGTV, you may not know that a "property virgin" is someone with very little experience in buying or selling their home.

ANYHOW. In the previous thread, it was the consensus of opinion to get Title Insurance. Period. Always get it. Amen. End of discussion.

It is not cheap. It is $1200.

My first reaction is that we certainly would not need it, since the developers of TV have a clean business reputation and this is a brand new house and we are NOT having a mortgage.

I am very thrifty. I am also very conservative financially.

A title that is not clear could have a contractor's lien against it, but that seems unlikely somehow, as big an operation as The Villages is, and the ongoing clearing and building being so widespread. People don't work for people that don't pay their contractors, and I would assume that this is a little town and word would get around if TV didn't pay.

Am I being dumb about this? My husband said to ask all of you for your opinion (again)and we will know enough to make an informed choice.

I would like to reiterate that if it was anyone but The Villages,(One of the largest and financially sound builders in the country, by all accounts,) there would be no question but to buy Title Insurance. We always have before. Eight times.

[barb1191]

I paid cash for my home in TV and did NOT purchase Title Insurance. Upon a Google search the response is as follows;

http://www.bankrate.com/brm/news/DrDon/20021219a.asp

I too am Ms Frugality and a risk-taker when it comes to insurance. Feel most insurance coverage is a waste of money. You pay and pay and pay and if you make a claim, they drop you like a hot 'tater.

They also try to sell title insurance when purchasing an auto from a dealer. DO NOT ALLOW them to add $$$$ to the bill of sale for this insurance; some auto dealers even have the gaul to have this charge ($500+) imprinted on the bill of sale. Total waste of money.

I challenged this charge with a local auto dealer in Leesburg when I bought a car there, and they wrote me a check to refund this charge.

Just my opinion, for what it's worth. .....barb

[Lil Dancer]

We didn't buy it either. In our case, the bank has their title insurance, and we hold a small mortgage. Our thought was, if something happens, the bank's insurance would cover things. I agree, the chance of a contractor's lien is small. I suspect most people don't question this type of charge, they just go out and get it. We tend to be pretty frugal, and this looked to be overkill. I'm sure you'll get many opinions to the contrary, however.

[Paul T]

When you say “The Bank has their Title Insurance” does that mean you paid a fee at closing that covered their Title Insurance but did not include you the owner? Let me guess, - you paid over two grand for the banks Title Insurance and then were offered the same for another $1200. What in the world would that $1200 really be for other than the typing cost to add your names to the banks name on the insurance documentation? Did the Loan disclosure documents indicate a fee for Title Insurance but leave out the fact that it was only for the bank? If so, is that a demonstration of best business practices? And, if so, would you recommend such an institution to a friend or family member considering a mortgage?

[Lil Dancer]

To my knowledge, the lender always requires title insurance to protect their interest up to the amount of the loan, and owners are advised to get their separate title insurance policies.

There is quite a bit on the internet regarding title insurance, kickbcks to lending institutions, etc., and the fact that once the owner gets the insurance it may be written up in such a way that it may not cover him/her in all situations.

In any event, it appears that title mistakes are rare, so we didn't purchase it.

[SteveFromNY]

Perhaps all these years in NY has made me more paranoid than most, but I always understood title insurance protected against more than a lien. If some local dug up a deed from the 1800's that said your land is his, there could be a problem.
$1200 is a small percentage of the overall cost, and I just thought of it as part of the price. Like one of the taxes you pay.

[Boomer]

This topic sure has been invited to the dance a bunch of times. But that's OK. I'll let it give me another twirl.

You know how people say, "The bank requires title insurance for mortgages, but I am paying cash so I don't need it."

I might be being dense, but I have never understood that logic.

If you are paying cash, you are the bank.

Now, I know that you could say that the bank is just requiring title insurance to make money on selling the policy itself, not because they are concerned, no matter how remotely, about losing their investment in your mortgage.

Well, maybe. Maybe not.

But because I can't get past the fact that if I pay cash, I am the bank, I will just do what the bank does and get the title insurance.

Expensive?

Maybe. Maybe not.

For me it's the cost of sleep.

You really don't have to figure out whether or not to buy title insurance.

You just have to figure out your own cost of sleep.

Boomer

[Lil Dancer]

Exactly. Whether you pay cash or not, you are assuming all risks. I guess it depends on how much you judge the risks to be, as to whether or not you get the insurance. We've owned many properties over the years, and we've never once(knock on wood) encountered any title problems, nor have we ever met a single person that had a title problem that required the use of their insurance. Doesn't mean that it will never happen, obviously, but we felt the risk in our case is extremely small. We also felt the Villages probably did a good job of vetting the original titles when they purchased land. I understand that most people want there to be zero risk, so I respect that.

[Boomer]

Lil D and I are saying exactly the same thing. She's right.

You see, I am one of those pretty conservative investors. You know the type. Stocks with a long uninterrupted dividend paying history. Stocks that go up and down like all the other stocks. But the check is always in the mail. (Well, at least it has been so far. But who really knows?) I am boring in the money department. To me, a cash investment in real estate is just that, an investment. So I view it like I do any other investment. Pretty conservatively.

When I write about this kind of thing, I always say that I ask myself, "What is the cost of sleep in this one?" I really do that. And it sounds like the rest of you do, too. It's just that sleep costs vary.

I am going to put a link here because some might find it interesting. This link will give you the news history of the Erpenbeck scandal that happened in Northern Kentucky awhile back. After reading about this mess, I knew that I would always buy title insurance. Cash buyers who did not were in for a long, rough ride.

This is a disclaimer, like the ones you hear on television, so I am typing really, really fast so listen closely. This link is for educational purposes only. This link has nothing, I repeat NOTHING to do with TV's developer. This link "don't say nuthin' bad about The Villages." (You have to sing that part or you will think I am using bad grammar.)

If you have read and understand the disclaimer above, and you have signed it, and you are interested in reading about a home title nightmare, click away.

http://www.enquirer.com/erpenbeck/

(Oh and this link tells you more than you ever wanted to know about this thing. But I thought I'd put it out there anyway. Actually, just reading the titles of the many articles included in the link can be an education in itself.)

Boomer

[The Great Fumar]

It is the sellers responseability to present a clear title to the buyer.....He has to buy the title insurance , not the buyer........

call a broker , and they will confirm........

fumar

[nanci2539]

I had a bad experience in MA. After living in a home for over 20 years; I found that I did not own the land my home sat on. Even with title insurance. The short version is the title insurance company paid the policy but I still did not own the land. The owner (a local developer) owned the land and wanted to build behind me. The only way he could do this was to apply for a variance using a small parcel on the side of my home as a access road. If I gave him this, he would give me the land my home sat on. The neighbors were up in arms; I was in town meetings for over five years. We started off friends, we ended up enemies. We went to court; they found in his favor; he owned the land. He offered to sell it to me for $500K. At that point, we didn't speak. And then he passed away! He died of a heart attack instantly. His wife blamed me and all the stress he was under. She told me (via a legal letter) I had a month to get out of the house or she would have me arrested!

I finally sold it back to the original builder for $80K. A fraction of what the home was worth.

By paying the policy, the title insurnace was able to walk away. So, even with insurance, I still didn't own the property!

It was a mess! My suggestion, get the insurance! At least you get compensation if there's a problem.

[784caroline]

SOrry but I really donot understand what happened to you. If you had title insurance why didnt they come to your aid? You say "title insurance company paid the policy but you still did not own the land"...what policy Then you say "by paying the policy, the title insurance company was able to walk away"...im confused!

Given your experience, why would you recommend someone getting title insurance if it failed to help you out when you needed it?

[SteveFromNY]

I had a bad experience in MA. After living in a home for over 20 years; I found that I did not own the land my home sat on. Even with title insurance. The short version is the title insurance company paid the policy but I still did not own the land. The owner (a local developer) owned the land and wanted to build behind me. The only way he could do this was to apply for a variance using a small parcel on the side of my home as a access road. If I gave him this, he would give me the land my home sat on. The neighbors were up in arms; I was in town meetings for over five years. We started off friends, we ended up enemies. We went to court; they found in his favor; he owned the land. He offered to sell it to me for $500K. At that point, we didn't speak. And then he passed away! He died of a heart attack instantly. His wife blamed me and all the stress he was under. She told me (via a legal letter) I had a month to get out of the house or she would have me arrested!

I finally sold it back to the original builder for $80K. A fraction of what the home was worth.

By paying the policy, the title insurnace was able to walk away. So, even with insurance, I still didn't own the property!

It was a mess! My suggestion, get the insurance! At least you get compensation if there's a problem.


Nanci - what did the insurance actually do for you? What was their compensation to you? This is exactly the kind of situation I thought title insurance was supposed to protect you against, but I'm not able to tell from your post what it did to protect you.

[redwitch]

Sounds like she got back her initial purchase price of the house or at least the initial value of the land itself, just not the appreciation of the land and, possibly, not the house itself.

The biggest concern I would have with not getting title insurance is that there might be a farmer's estate somewhere down the line that has a claim. Another possibility is a sub-sub-contractor -- they frequently don't get paid and end up filing mechanic's liens. The third reason to get a policy is to protect the actual measurements of your plot. If it is later determined that a surveyor was off, you have some protection.

Basically, though, I agree that if you won't lose any sleep over not having it, then don't get it. Personally, I'd be awake nights waiting for the nasty knock on the door telling me something was wrong and losing the property but that's me (and my luck, sometimes).

[TomW]

Title Insurance, as I understand it, is insurance against errors and defects in a title search. The title search is normally done by professionals but occasionally an error is made as in the case mentioned in a earlier post. The search is supposed to turn up any claims against the property including (and especially) ownership claims. I would think that the insurance would cover any problem arising from a defective title but apparently the amount exceeded the policy limit or the insurance was for something else other than defects in the title.

[Sidney Lanier]

At the risk of being repetitive (and also being a New Yorker...), to me insurance is peace of mind; it's being able to put my head on the pillow at night and have one less thing to think about. Granted we bought a resale, meaning the seller was responsible for everything dealing with title insurance, but even so, if we were buying new, without a doubt--given the amount of investment in a home--$1200 seems a reasonable figure. However, you have to do what you're comfortable doing....

[nanci2539]

Nanci - what did the insurance actually do for you? What was their compensation to you? This is exactly the kind of situation I thought title insurance was supposed to protect you against, but I'm not able to tell from your post what it did to protect you.

I wrote a long response and lost it! Okay, let me try to explain it but caution, this is an explanation one gives over a glass of wine!

When we purchased our home, the bank mandated we have title insurance. So, we did go through the process. Assuming they did their job and the title was clear. How could it not be if the bank was willing to give us a mortgage. Right?

When my first husband passed away, not only was I dealing with the loss, I was dealing with trying to figure out how I could afford my home. I went back to work. Some 3-4 months after his passing, my neighbor who lived behind me (now I backed up to woods; he lived behind the woods). Let me prefix this by saying I lived on two acres of land. He came to the door saying "I think I own the land your house sits on". This neighbor was a big developer in town. He said he wanted to talk to me about it and maybe we could resolve this.

I made my excuses and immediately called my attorney. He said "anyone can say anything; let him prove it". The neighbor called mt that night insisting that I have the land resurveyed. I told him that as far as I was concerned, I have a deed and plot plan. I own the land. He then had the entire land surveyed at his expense. The new plot plan showed a discrepancy. What had happened was the title insurance surveyor did not go back far enough in time. He only went back 25 years.

So, I can go on for at least ten paragraphs explaining this but the condensed version is the neighbor said that he wanted to build on land behind me but needed an access road. He would give me the land under my home if I would give him the strip of land beside my house so he could have his road. It seemed an easy way out but in order for him to have this road, he needed a variance. We would need to present this at the next town hall meeting. The neighbors were advised; the neighbors did not like this. The neighbors protested. It became a battle with me against the neighborhood trying to get them to undersand that I was in a bind and it was the only way out for me. They all had their opinions. What about traffic; what about kids on bikes; etc.

So, my attorney contacted the Title Ins. Company; we had a meeting; they saw the error, they were concern enough to pay me the value of the policy which at the time was $140K. That was my mistake. I took the settlement and that removed them from any further liability but in my mind, I thought I could just buy what I needed. The parcel of land wasn't even worth $20K if that.

The neighbor said "no" - he wanted the variance. He said there was no way it would not be granted. I believed him and in reality, it should have passed but each town meeting brought out more neighbors protesting. See, my town did not like the developers at all. They consdiered them all corrupted. They kept insisting I sue the guy who built my home. He was still in town and a bigger developer than the guy who owned the land.

My attorney was useless; he knew zilch about land and the law of the land. So, my attorney finally took it to court to let them decide who owned the land. They found in the neighbor's favor. He kept putting pressure on me to stand firm on the variance he needed. During this time (now it was someting like four years later); he passed away. He died suddenly of a heart attack.

His wife blamed me and all the stress he was under. A month later she had her attorney send me a letter saying she wanted me out in 30 days. Her intent was to tear down the home. I called the builder I bought the house from - a big shot in town. He felt bad for me; bought the house for $80K and said he would deal with the wife. They were friends and he would take care of the problem. Don't ask me how I was able to close on a house without a clear title. But I did and left MA and the house that my kids grew up in and all the memories that went along with it.

So, does this all make sense? Probably not because legally it should not have happened.

I know better now; no way would I buy a home without title insurance and no way if there was an issue, would I ever settle with the company. That was a major mistake because it was really their problem to fix and they took advantage of a young widow who didn't know any better. And her attorney who was only looking at his cut of the settlement. Boy, was I ever naive in my hey day!

Okay, hopefully, some of hits makes sense!

[Boomer]

I wrote a long response and lost it! Okay, let me try to explain it but caution, this is an explanation one gives over a glass of wine!...


nanci,

I read every word of your story. What an ordeal. If we ever meet, I will buy you that glass of wine...or a bottle...Oh, what the heck, a case even. (Uh oh. I am really shooting off my mouth again. I hope you have peasant taste in wine like I do.)

Boomer

[nanci2539]

Thanks Boom; back then it was a big ordeal and I felt trapped. So when folks talk about developers being corrupt, I just sit back and smile because I lived it. It all boils down to making a buck. The developer who bought back my home for $80K knew it was worth at least five times that but he too took advantage. As far as I know, he resold the home and probably made a hefty profit. He uses his own attorney's who are on a perpetual retainer; he has tie in's wiht most of the banks in the area and probbaly any title insurance company still operating,

Oh, they did finally build behind the house; probaby 5 new homes.

And I'll take that glass of wine - or bottle! We'll be permanently relcoating to TV end of May - well, we're renting for a few months in Springdale until we buy a home.

[784caroline]

nanci...I now understand.... wow!! what a bad period you went through. Yes you were too hasty to settle with the title company especiallly if they were remiss in only doing a search going back for 25 years. Depending upon how the insurnace was written most likely their max amount of payment was the policy amount (which you received) but that would have been for simple oversight not for negligence in doing a proper title search.

I think you were also very patient with your attorney for he apparently was over his/her head and apparently did not provide you proper representation or advice. Also in real estate, there is a term that assumes if you occupy, use , and assume a piece of land is yours with no objection from anyone over a period of years (in florida I think it is 20 years), its presumed to be yours and much much harder for another party to lay claim. Again your attorney should have looked into all of this.

Your case is probably one in a milliion and this company settled with you fast for they are so flush with money because of so few payouts.

Thanks for sharing your story and clarifying the issue.... enjoy your wine now that this is behind you!

[SteveFromNY]

Nanci - that's a terrible lesson to learn in a very hard way. I agree it's a very long shot to have that happen (why couldn't it have been Lotto?), and I suspect you could have squeezed the title company for more with proper legal representation, but on the plus side, you did at least have the title insurance there to cover that initial $140K. Without it, you'd have received nothing, right?

[nanci2539]

Correct Steve; the policy did give me something. And if I recall, they had a small period of time to settle the policy or I could have sued them for treble damages. See, I thought that I could just buy the land. It was just a parcel under my home - everything else I owned. I was shocked when the "owner" refused my offer and I think I went as high at $50K. Back then, you could buy an acre of land for less than that.

Back in those days, I relied on my late husband for these types of things. I was a stay at home mom and was more involved with little league and basketball. So, after this passing, I just turned to who I thought were the experts.

The attorney was a family attorney and I really feel wasn't out to "get me" but he just didn't know the legal side of land. When I say I was naive, you have no idea. If that happened now, I would be ripping out the offender's lungs!

It was a bitter lesson but on the plus side, I moved to IL where my son and daughter now live with their families. I remarried and we live in a beautiful home in a beautiful community. I was able to sell this home in less than three months and now we're off to the next passage; moving to TV.

The only downside for me is emotional and we talked about this before - I struggle to leave my family and three young grandchildren. I can't even think too long because I go into panic mode!

Three more weeks and we'll be on our way!

[SteveFromNY]

Nanci - good luck to you as you start this next phase of your life!