Why Title Insurance?
One question we get often is “Should I buy Title Insurance when I buy my new house?” Without hesitation, the answer is “YES” 100% of the time.
Title insurance is exactly what it sounds like – insurance that your title to the house is clear. In other words, no one is going to claim after closing that they own the house instead of you; no judgments or mortgages of the prior owner will pop up and claim that they need to be paid under threat of foreclosure.
Title insurance is paid once, when you buy the house. Typically, in the Tampa Bay Area, the seller pays for the buyer’s title insurance, so the buyer doesn’t pay for title insurance until she sells the house, and even that can be negotiated in the contract. The buyer does pay for the lender’s title insurance policy, so that policy would be paid every time an owner buys or refinances the property, but the premium on a Lender’s policy is typically a small percentage of the loan amount. Plus, if the refinance occurs within a few years of the purchase, the title company must give a discount on the title insurance.
The title insurance policy does have certain exceptions (think of these as pre-existing conditions). For example, the plat of the community, any community restrictions or easements, and any utility easements will typically be exceptions to the title insurance policy. Therefore, if you fail to abide by a rule of the community, that is not a title issue.
So when is title insurance a good thing? We belong to an attorney social media / networking / advice website called AVVO that allows people to ask questions that attorneys will answer for free. The person asking the question can then decide to pursue further with the attorney if necessary. Recently, we saw the following question: “I recently purchased an investment property. Upon turning on the water, I found that there was a $1,000 outstanding water bill and a lien was filed against the property. The closing title company went out of business. What can I do?”
The closing title company is simply the title insurance agent. They issue the policy. For something like this, I would suggest making a claim on the policy. Think of it this way – if you get into a car accident, you don’t call your car insurance agent, you call the car insurance company (Progressive, Geico, AllState, etc.) directly. The same thing applies to title insurance. You can call the agent (the title company) but if they’re out of business then call the underwriter.
In this situation, if the lien existed prior to the owner’s purchase and the title company missed it, then the title insurance underwriter should pay it, and protect their insured – the homeowner.
We have filed title insurance claims, when appropriate, on behalf of our clients. If you have a title issue, or if you want more information on title insurance and title insurance claims, please subscribe to the Crushing Debt Podcast, on iTunes, Stitcher, and GooglePlay. If you prefer, please contact us to schedule a free initial consultation to discuss your options at 727-261-0224 or email me directly at firstname.lastname@example.org.
Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with asset protection, the sale and purchase of real property, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay area.