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Title Insurance Is More Important Than You Realize
I recently had a conversation with a new home purchaser about owner’s title insurance. She called me and stated that she wanted to waive her title insurance because “all of her friends had purchased it, however, none had ever used it.” My response, “none of them have ever used their life insurance, but it doesn’t mean they do not need it.” We insure our cars, homes, health, lives and even our children, why would we not want to insure the biggest financial investment we will ever make?On October 3, 2015, many new regulations were put into place by the Consumer Financial Protection Bureau (CFPB) to help protect consumers during the often confusing process of obtaining a mortgage loan in conjunction with the purchase of a home. One of these regulations involves using the word “optional” on a lender Loan Estimate when describing the cost estimate of owner’s title insurance protection. By describing this important consumer protection as “optional”, CFPB has prejudiced some home buyer’s decision making prior to the title insurance company having the opportunity to explain the importance of insuring title to their homes.Unlike other insurance policies in which consumers will make monthly, quarterly or yearly payments in exchange for protection against unforeseen risk, title insurance is a one-time fee, charged at settlement, and included in the homebuyer’s closing costs. Owner’s title insurance protects homeowner’s against hidden defects in title to their property, such as fraud or forgery, which may be impossible to detect in the title examination of the property. Furthermore, there is a miss-conception that someone made a mistake in order for a title issue to occur. In many instances, claims arise even though everyone in the transaction performed their jobs correctly.Title claims can be as simple as a seller writing checks on an open home equity line of credit secured by the property they sold to you. At closing, the lender was directed to accept payment as payment in full on the loan and close the account; however, this did not occur. The line of credit was paid down to 0, left open and then promptly charged back up to a balance of $50,000.00, which is a valid lien on your property. Imagine receiving notice of foreclosure on your home for a loan that is not even yours! In this scenario, owner’s title insurance would pay for the cost of legal fees incurred in defense of title to your property, including actual loss, should it be determined that the loan be paid in full.This is just one example of numerous issues that could affect title to your property. As a consumer, the decision to purchase owner’s title insurance is yours, however, it is important that you make this decision with the full knowledge of the product, its cost and benefits to you as well as understand the risks involved in waiving coverage. Before making any decision you should speak to your Realtor and trusted title professional.If you were wondering, the response to my statement “none of them have ever used their life insurance, but it doesn’t mean they do not need it” was a laugh and agreement to purchase owner’s title insurance. She had never looked at it that way.
Post contributed to Berkshire Hathaway HomeServices Select Realty by Phillip Blake. Phillip Blake is Manager of MBH Settlement Group of Fredericksburg and has over 13 years of experience in the title insurance and settlement services industry.
After 15 years in sales, Dan Lesher began his career in real estate in 1997 with the goal of providing superior customer service, inspired by his own experience with lackluster real estate agents. Ove....
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