Homeowner's Title insurance questions

Hi folks, I did a search and couldn't find a specific thread dealing with title insurance questions.
That said, I have two questions of my own.

Small details: I'm purchasing a foreclosure which is a HUD home located in suburb of Detroit (and decent neighborhood). I will live there. The price is $107 and my financing is with USAA 30 yr. fixed, 20% down. I don't consider myself poor, just frugal.

First, Is homeowner's title insurance really necessary? $800 isn't much compared to the price of the home I'm purchasing, but if I can go to the court house and spend a few hours to do it myself, I'm willing- I don't make 400 dollars an hour yet.

Second, If the FWF gods decide that it is important to get, are there specific title insurance providers I should look at?
edit: grammar

Your lender will require title insurance. The only way to get around it is to not finance the property. You can save money on the title insurance if you shop around.

I'll clarify what retmil said:

Your lender will require title insurance on essentially their 80% portion of the property value. Insuring 20% that you own is optional, but would be very highly recommended in your situation (initial purchase, foreclosure, etc). The extra cost should be minimal and likely included in $800 you were quoted.

Depending on your state's regulations, title insurance policy pricing may be uniform across all insurers or it may vary quite a bit. Other title-related charges can easily vary from issuer to issuer, so you can shop around.

Xnarg said: A title search should reveal liens and delinquent taxes against the property, which may be significant. Easements and title conflicts should also be revealed.

OP, you argue that you could easily win any legal/lien challenge by going to the court house for a couple of hours. That's not a safe assumption.

Xnarg, I didn't quite say what you've said I've said, but I think I understand that you feel that the cost of $800 is not worth the potential headache of discovering liens etc that I might miss as a lay person if I go to search the title.

Can anyone else add their input? How about people that purchase properties frequently?

highmktgoods said:
Small details: I'm purchasing a foreclosure which is a HUD home located in suburb of Detroit (and decent neighborhood). I will live there. The price is $107 and my financing is with USAA 30 yr. fixed, 20% down. I'm don't consider myself poor, just frugal.

I know Detroit is very cheap, but I assume you pay $107,000. Not Onehundredandseven dollars.
I cannot imagine to finance $107 over 30 years.

As someone else said, no lender is going to give you financing without title insurance.

I bought 5 properties in the past 12 months and you would be surprised if you knew what can happen.

How about some unrecorded activity? I bought a house where the previous owner had deeded 50% away to some LLC but (intentionally) did not record it. Believe me, I was sweating for a while, .. because I did not have title insurance.
Unrecorded does not mean that it has no substance.

Other scenario. The previous owner's live-in girl-friend who has lived there for 10 years and suddenly comes out with a claim?

Even if you would buy cash, $800 is pennies, pay them for your peace of mind.

-Peter

By the way, foreclosure is one of the situations under which I would seriously consider NOT purchasing title insurance. This is because foreclosure proceedings wipe out junior liens, so the usual concerns about materialmen liens and the like are not a concern when you are purchasing a foreclosed property.

Further, remember that when you purchase a property, the warranty deed that you receive from the seller gives you recourse against it for any and all title problems. In a regular residential transaction, these recourse rights are of limited value because the seller may or may not have the resources to help you or to compensate you for the damages. When you are purchasing a foreclosed property, however, the warranty deed comes from a bank, which has the resources to ensure that title issues are remedied and to compensate you for any and all damages that you may suffer as a result of these issues. Hence, although not totally bulletproof (nothing is), to me purchasing a foreclosed property from a bank carries far fewer title risks than a regular residential transaction. This, in many cases, would cause me not to purchase title insurance.

highmktgoods said: Thank you geo123, I was sitting on the fence until I read this.I don't mean to speak from both sides of my mouth here but I wanted to make sure that you understand that a number of title defects would not be cured by a foreclosure. For instance, if there was a federal tax lien that was filed against the property, which was not properly extinguished by the foreclosing lender's attorney, it would remain on the property. There could also be various defects related to the legal description and the like that would not get cured by a foreclosure.

In most if not all of these cases, you should have recourse against the seller-bank by virtue of the provisions of the warranty deed, but actually obtaining such recourse wouldn't be as easy as simply calling up the bank and demanding that it fixes the problem. At the same time, even with title insurance, it is generally not particularly easy to get the title insurance company to quickly rectify your title issue and, depending on the issue, it can take months to get something done.

As with all other important decisions out there, please be sure to do your own research to ensure that you are comfortable with the decision. Please do not just rely on my or any other people's posts to make such a decision without independently confirming its accuracy and its applicability to your specific situation.

xoneinax said: How did you resolve it ?

I held my breath and waited

Their lawyer had a big mouth, but not much substance.
Quote: 'Bankruptcy is only one trick in my bag. You will regret this purchase. We have some bad surprises for you.'

I told him to show me what he got, answer was just more garbage ('we currently sue Chase')

Eventually they folded. The deeding away was invalid.

This was a trustee sale, so I *could* not get title insurance. Believe me, the people at First American or Chicago Title are not geniuses either. They check the records and issue title insurance if everything looks clean.
They do make mistakes and then the insurance would pay.
Do you think that the people at the title company check the chain of title and all possible things all the way back to 1900 or whenever the parcel was divided and sold? I *BET* they go back to the last sale and look from then forward.
Which should be good enough in 99.9% of all cases.

In the above described case, the trustee had checked records, foreclosed on the defaulting borrower, only to rescind the trustee's deed 4 months later. Yes, the foreclosure was [temporarily] reverted. I state that as an example that professionals can make mistakes in researching public records.

Not getting title insurance on a regular purchase is plain stupid. It's like saying 'I don't need car insurance because I drive carefully and observe all traffic laws'.

Or a quote, not sure where I read it. 'If you think title insurance is expensive, then you cannot afford not to have it'.

-Peter

geo123 said:
Do you now see the reason that I keep saying that good title is far better than title insurance?

I see your point. I have never run into such a situation. The person who wrote that originally (you?) made the right point. Joining lot 1 and lot 2 should not have been named 'lot 1'.

When you purchase title insurance, you get a title report which includes a vicinity map. The vicinity map does show the lots and measurements.
I suppose it comes down to the buyer. The buyer should have seen that the title report described a lot that does not match what he thinks he is buying, e.g. the paper says lot is 50 feet wide and the house sits on a 90 foot parcel.

However, I admit, that I rarely spend a lot of time looking at this map. It never was an issue as I never bought in such a newer subdivision. I can see that someone falls in a trap there.

-Peter

xoneinax said: I know your situation was eventually resolved in your favor, but what would have happened if it was not. Would the Trustee have had to refund your money? What is the legal responsibility of the Trustee?

Yes, the trustee would have refunded me the purchase price. It would still have been a loss for me ($330k tied up, and other small expenses like recording, insurance, lawyer..)

-Peter

ptiemann said: When you purchase title insurance, you get a title report which includes a vicinity map. The vicinity map does show the lots and measurements. I suppose it comes down to the buyer. The buyer should have seen that the title report described a lot that does not match what he thinks he is buying, e.g. the paper says lot is 50 feet wide and the house sits on a 90 foot parcel.First, you do not have to purchase a title insurance policy to obtain a title report. In every single real estate transaction you always conduct a title update, which is summarized in a title report, to determine the exact status of the real estate. Hence, if all you would like to see is the title update, you do not need to purchase a title policy to get that. The reason that you purchase a title policy is to insure against various inadequacies in the title report.

By the way, there is no such thing as a "vicinity map." I suspect that you are talking about a plat map, which is a document usually prepared by subdivision developers showing the location of various lots in a subdivision. If your legal description is relying on the plat map, quite often all it'll say is the lot number on that specific recorded plat map. If the legal description also contains a metes and bounds description, you will NEVER be able to tell whether it is describing the right property without also looking at the survey on which such a metes and bounds legal is based.

ptiemann said: Do you think that the people at the title company check the chain of title and all possible things all the way back to 1900 or whenever the parcel was divided and sold? I *BET* they go back to the last sale and look from then forward.That's incorrect. If there is a previous title policy still in effect on the property, then the title company will only go back to the effective date of the prior policy because the prior policy covers everything up to that date. If there is no such policy, however, then the title update goes all the way back to the acreage tract, if it's a subdivision. If you are not purchasing property in a subdivision, the title search goes back between 50 and 150 years, depending on the property and the state.

In the above described case, the trustee had checked records, foreclosed on the defaulting borrower, only to rescind the trustee's deed 4 months later. Yes, the foreclosure was [temporarily] reverted.What do you think you would've gotten if you had purchased title insurance in this case? Either way you would have received your purchase money back from the foreclosing lender. Title insurance would not have done anything for you in that case.

Im having a personal title insurance issue...due to what seems to be gross incompetence by the title company, and despite repeated requests, they have failed to provide me a copy of my policy purchased during my REO purchase. I even filed a Dept of Insurance complaint, the insurer responded stating they provided a copy of the policy -but in actuality only provided a copy of its schedules and not the actual policy.

I know there are strict time limits for property insurers (auto home etcz0 to respond to issues like this, but I dont know of similar requirements for title insurance to provide timely responses.

SUCKISSTAPLES said: I know there are strict time limits for property insurers (auto home etcz0 to respond to issues like this, but I dont know of similar requirements for title insurance to provide timely responses.There are no such limits that apply to title insurance companies. Instead, they are given "reasonable" time to respond to a claim and the reasonableness of the response is based on the specific circumstances associated with the claim. It is not at all unusual for them to take 6 months just to conclude their investigation and at that point the response will often be a claim denial, reservation of rights, etc... rather than a settlement offer.

For instance, one of the most common defenses asserted by title insurance companies in response to a claim is the lack of loss. They often adopt the "wait and see" approach, asserting that the mere fact that there is a demonstrable and covered title issue does not mean that they are required to make a payout until and unless you can demonstrate an actual rather than a theoretical loss, which, in many cases, won't happen for years.

zmre2b9 said: If commercial/development real estate attys have this much of a problem with title insurance cos paying on losses, it looks pretty grim for a mere consumer to get any real coverage from a title ins. co.Yep, I agree with this assessment. In general, however, although title insurance companies can be incredibly difficult to get a payout out of, they can be helpful in resolving an insured title issue, so that it doesn't result in a loss, because that is one of the ways that they can mitigate their damages.

I don't see how they are anything other than a scam for the AVG home buyer. (Iowa excepted b/c they have a low cost government run program.)If I had to generalize, I can tell you that as a residential purchaser I would absolutely ALWAYS purchase an owner's policy if I was buying new construction, since it is extremely common to have materialman's liens on those and title policies typically provide good coverage against such claims. I would likewise ALWAYS purchase an owner's policy if the property I was buying had undergone recent remodeling/renovations, so I wouldn't have to worry about materialman's liens there. In all other circumstances, it would be a case-by-case decision for me, which would depend on the precise circumstances surrounding each property.

mungbai said: There is a coupon for Freddie Mac homes. If yours is a HUD home, it may be eligible. You submit the coupon and get up to 3.5% of the closing costs covered. For me, it was $850, which was 1% so ymmv. Also covers two years home warranty. Da LinkWhat does this have to do with homeowners' title insurance?

It paid for my homeowners title insurance as part of closing costs. SORRY I DIDN'T MAKE THE CAUSAL LINK EXPLICIT. I APOLOGIZE PROFUSELY TO ANY AND ALL WHO WERE OFFENDED.

geo123 said: mungbai said: There is a coupon for Freddie Mac homes. If yours is a HUD home, it may be eligible. You submit the coupon and get up to 3.5% of the closing costs covered. For me, it was $850, which was 1% so ymmv. Also covers two years home warranty. Da LinkWhat does this have to do with homeowner's title insurance?

Hi folks,

I ran into this thread while searching for info on title insurance. I wonder if gurus like Geo123 can offer some insight since I'm pretty ignorant of the facts here.

We are buying a house and will be closing in about 20 days. I saw some people on fatwallet used EntitleDirect as their title insurance or settlement company, and did a quote with them. The owner's and lender's insurance costs about $1450 plus $295 title search fee, versus about $2400 quoted by the title company recommended by my agent (a very close friend). I emailed the quote to the agent who forwarded it to the Title company. Here is the response from the Title company:

====================================
I think the customer should choose the title insurance company which is going to exist for long time. Such as Chicago Title, First American Title, Steward Title, Fidelity Title, Commonwealth Title. Because you don't want to choose a title company that is small and you don't know whether they are going to exist when you need them.

To be frank I've never heard of the title company which has given the customer the quote.

Those major title companies' quotes should be very similarly(may be less than $50 difference between different major title company).

For the subject property, the title is not clear. There is one un-released Deed of Trust from seller. I have communicated with the seller for days to get information. And contact the bank to fix this problem. I don't know if you change to another title company whether they will have enough time to clear it or not.

If you want less expensive title insurance premium, I can change the owner policy to basic owner. Please see the attached HUD-1.

I am going to stop my processing job until the buyers make their finial decision. Also I have given the title binder to their loan office already.
==========================
Then my agent added this:

I've talked to settlement company and XXX explained to me. The quote you got is basic pollicy while the one on HUD-1 given by Title XXX is premiere policy. The key point here is security. We're talking about insurance to portect your house worth at $725K. You don't want to go with a small company to save a couple of hundreds. The quote from all major 5s should be same.

I'd also like to work with a company which is reliable and meanwhile not expensive. XXX has done a very good job. My house was closed with her and I got Chicago Title Insurance as well. Actually title company has done a lot of work behind the scene. XXX had found 3 liens on the house and had be working very hard with the seller to clear all of them before settlement.(And she hadn't got any help from listing agents. They just forward everything to the seller) She has cleared one so far, and is working on another right now. You might think closing is easy, but when there's problem, you do want experienced professional.
=================================

I'm not sure if I should continue to press for the cheaper policy. It sounds like the title has some problems and the title company has already put in a lot of effort trying to clear them. I don't know if this has anything to do with the title insurance. Also, I'm not sure what the difference is between the "basic" policy and "premiere" policy. Any advice?

geo123 said: ==========================
Then my agent added this:

I've talked to settlement company and XXX explained to me. The quote you got is basic pollicy while the one on HUD-1 given by Title XXX is premiere policy. The key point here is security. We're talking about insurance to portect your house worth at $725K. You don't want to go with a small company to save a couple of hundreds.If you were to ask your agent to explain to you the difference between a "basic" and a "premiere" policy, he/she wouldn't have a clue. Yet, your agent is giving you a recommendation?!

By the way, there is no such thing as a "premier" title policy. If you are receiving an ALTA policy, which is unclear, you can get what is called an "expanded" policy. Regardless, you need to figure out what it is that you are getting in this case and then decide whether you even want it.
I didn't know enough to answer the question, but the "basic" and "premier" thing sounded like someone selling Monster cables to an uneducated consumer.

Xnarg said: FWIW, Fidelity has been on an acquisition binge for the last decade. Of those firms mentioned above, they own Chicago Title, Stewart Title, Commonwealth. The only firm on the list they don't own is First American.As I mentioned above, Fidelity does own Chicago Title and Commonwealth but does not own Stewart Title, which is a separate company, as is First American.

Fidelity also owns Landamerica and Lawyers Title (and a bunch of others).Right, that's how Fidelity came to own Commonwealth and Lawyers Title, which used to be LandAmerica companies. LandAmerica was forced to file for Chapter 11 at the end of last year and Fidelity purchased a number of LandAmerica companies.

chimeer said: I know next to nothing about title insurance but generally lenders can't force borrowers to use a particular insurance company they can only force a certain level of coverage.I was referring to lender title insurance. per hud.gov, on page 3 of the standard GFE, there is an explanation of charges that could change. Under the rightmost column of the standard HUD GFE, it states:

These charges can change at settlement:
-- Required services that you can shop for (if you do not use companies we identify)
-- Title services and lender’s title insurance (if you do not use companies we identify)
-- Owner’s title insurance (if you do notuse companies we identify)
-- Initial deposit for your escrow account
-- Daily interest charges
-- Homeowner’s insurance