MtbbikeVanlife

Going through the painful process of buying a house and now being asked to stump out for Title Insurance.
As far as I can see, this is me being required to take out insurance in case the current owners of the house didn't actually own the title. But if my closing lawyers do their job properly then they should find this out. So I'm being asked to insure someone else's work ?
Am I being overly cynical ?
Carl.

Sheepdip

Pretty sure when it was explained to me it was in case there was ever a dispute who originally owned the land (i.e. a Native American claim)

Rete

Sorry that you are finding the purchase of a property to be painful. That was not our experience.

Title insurance insures more than just the present owner not actually owning the title to the house. It covers easements, court mistakes (i.e. typos), and goes back to when the property was first purchased or acquired for 'homesteading'. It is a one time fee and if needed it covers all your legal expenses and losses.

"Title insurance protects against "defects" in the title to the property you're buying. These could include someone claiming that he's the real legal owner, or that she has an easement allowing her to cross your land at will or that he has a construction lien on the buildings that the seller didn't mention. If you fight for your property in court, title insurance pays the legal fees; if you lose money because of the defects, title insurance covers your losses."

MidAtlantic

My lawyer saying that he bought it when he purchased a house was sufficient to convince me that the relatively small amount was worth it.

Do some googling and you may well feel that it is worth it for you too.

Pulaski

The advice above (#2 &#3) is true, but far from complete. The main reason for title insurance is to cover the possibility of someone registering a lien on the property, which is scarily easy to do under US law. Even if the lien was registered in error you could face a legal bill to contest the lien, and if the lien was placed by a tradesman, e.g. a plumber or roofing contractor, then the lien would likely by legally valid and the title insurance would pay off the amount of the lien.

In short, title insurance looks like a junk expense that can be avoided, but in practice it is dirt cheap insurance that covers some potentially nasty issues that could crawl out of the woodwork, possibly years after you bought the house - it is common for title issues to discovered relating to the previous time a house was sold, even if that was many years earlier.

Rete

This lien is called a mechanic's lien and does not, as Pulaski has noted, have to originate with the seller but can be against your home at a later time. Here is the definition of a mechanic's lien:

"A mechanic's lien has nothing to do with mechanics in the usual sense. It's a legal claim against property being improved, and it can be filed by anyone who provides materials or does work on the project and doesn't get paid.

What can be surprising to most homeowners is that it doesn't matter if you already paid the general contractor for the bathtub. If the subcontractor or supplier isn't paid by the general contractor, the law allows the subcontractors to come after you and the property that was improved (which is often your house). In the end, you may be responsible for paying for the work twice or being forced to sell your house, so it is important to understand how mechanic's liens work and how to avoid them."

Wintersong

Yup, this is pretty much what we were advised by our realtor when we bought.

mrken30

HOA's can also file liens for sums of less than $500 plus legal costs. Title insurance is totally worth it. I personally know of one case that saved someone in the region of $1mn. That would have been a lot of money to lose, but fortunately the title company paid up.

MtbbikeVanlife

Thanks guys - I knew I could rely on y'all to give me better explanations that the lawyers !
Carl.

Asg123

In my experience it's not cheap, it's over $1,000, but you need to have it.

Pulaski

It is compared to the price of the house. .... And I think it only cost us a couple of hundred dollars.

mrken30

I think it depends on the size of the policy, but still a small amount to pay in comparison.

Pulaski

I would imagine so, but while there might be some "economy of scale" for high value houses, I suspect that the ratio of premium to house price is fairly constant across the range of house prices.

AdobePinon

Hundreds of years in some cases here in NM.

Peter124

I was glad of title insurance when I found that there was a title problem that was not discovered when I originally bought the property. Yes, this shouldn't have happened, but it did. That's what insurance is for.

In the event, the title insurance company sorted everything out, no problems, and no questions asked.