Title Insurance?

[knx9211]

Does this go here? Who knows.

We’re closing on our new build home next month. Cash deal. Our preliminary closing sheet shows $4500 for title insurance. Since we don’t have a mortgage, do we really need that?

[lessel]

What little I know about title insurance is from our experience using it. We had it when we bought a house... I swear it was like $400 though. I had no clue what it was, just one of those things on the list that you pay for without paying attention to. Then about a month after we closed, we got a notice about a 'mechanic's lien' that was placed against our property. What happened was (allegedly) a carpet installer was never paid by the contractor who did some updates to the house before we purchased it--all done and paid for by the previous owner. I basically sent the lien to my broker and realtor and the title insurance kicked in and I did zero things beyond that. I got the vibe that if we hadn't had the title insurance, we might have been on the hook to pay the unpaid contractor.

But this was all 10 years ago, so I could be remembering things wrong. Seems like, even if there's no mortgage, since it's a new build there might be some issues along the lines of the one we had...could protect you against that, I think. But again, I remember the cost being way lower.

[puppylove64]

Yes you need title insurance. But that price seems high. I would ask about it. I thought it would only be a few hundred dollars. Title insurance protects you if there were any title/mortgage/lien problems in the past.

[ohgillian]

I think this fits on MM!

"Need" is kind of subjective on any insurance. I personally would want to have title insurance, even if I weren't financing and thus wasn't being required to purchase it.

[Accountingcat]

Yes, you need title insurance. Who knows who is going to come out of the woodwork and claim they own all the land your house is built on. I just looked at my closing docs and I paid $500 (as the buyer) and the seller paid $2040. It has the buyer insured for the mortgage amount and seller for the full sale price.

[scout8]

Absolutely, for the reasons others have mentioned already. I do think that the cost seems high though. I know the cost really varies depending on your location, but I would still ask and confirm that is correct.

[hbomdiggity]

I would def get title insurance for a new build home to protect against mechanics liens.

[carmenere]

Feb 18, 2020 16:42:34 GMT -5 Accountingcat said:

Yes, you need title insurance. Who knows who is going to come out of the woodwork and claim they own all the land your house is built on. I just looked at my closing docs and I paid $500 (as the buyer) and the seller paid $2040. It has the buyer insured for the mortgage amount and seller for the full sale price.

This. Also if any subcontractors weren't paid they could try to put a lien on your house. At the very minimum you need to do a title search, but IMO the insurance is worth it for peace of mind.

You are not obligated to go with the title insurance policy recommended by whoever did your closing sheet (agent? attorney?) and you can shop around for a better price.

[marie]

Yep... This is one of those things you always need. Newly built homes included.

[farmvillelover]

I’m a believer since I’ve had so many clients have issues that come up after closings but I’ve never seen a premium that high!

[knx9211]

Feb 19, 2020 11:57:17 GMT -5 farmvillelover said:

I’m a believer since I’ve had so many clients have issues that come up after closings but I’ve never seen a premium that high!

That’s what’s giving me pause! A friend who does title work tells me the premiums are set by a blahblahblahsomething authority but that premium just seems so ridiculously high. Our realtor told us something coming up for this particular property and how it was developed is pretty unlikely but said it was up to us as to whether or not we wanted the extra protection.

[knx9211]

Feb 19, 2020 14:08:02 GMT -5 Catlawdy said:

I always recommend getting it. That is a high premium, compared to what I'm used to seeing. Is the property a very high value property?

It’s in the 600s. So not low but not like a $3mil house.

[sakura]

Can I ask my own question? We’re buying a house as-is through an estate. We knew the owner and slightly know the family selling. Theres been no work done on the house in recent years. The title insurance is $1000, do we need it? Thanks!

[atarianna]

Title insurance is up to you. I only have opted to do the owner’s policy once and it was when we had purchased a foreclosure. Otherwise, I believe the money I’ve paid for the title search etc should hopefully uncover any issues. Since yours is a cash deal, you do not need to do title insurance but can opt to do it if you want.

One thing to consider is if there was a title policy issued in the previous 10 years (perhaps when the land was purchased) which you can get at a reduced re-issue rate of about 50%.

[knx9211]

Way back when just after I passed the bar, I did some oil and gas title work. I kind of just want to do a title search and review it to save myself the money. I am being very cheap. Hahah

[Mrs.flang]

I'll share my title search/insurance story. We paid for both (I think insurance is required in our state because I remember being like, why do I need insurance if I'm paying for the search!)

The search came out clean, but 10 years later, we became party to a lawsuit from a lake association that claimed that back when our house was built in the 1960s, there was some kind of shareholder agreement attached to it and that we were deeded the shares with the house and are consequently required to be a part of this association (along with about 600 other homeowners in the area) and pay annual dues to maintain the lake (with no real access or benefit attached). Our title insurance paid for our lawyers, but as of now we have lost the lawsuit. I think its in appeals or something, I can't really follow all the terminology of what's going on. I'm not even sure what our insurance will do next or how it will begin to cover this type of scenario. But I guess I'm glad I had it?

[carmenere]

Feb 20, 2020 10:40:20 GMT -5 sakura said:

Can I ask my own question? We’re buying a house as-is through an estate. We knew the owner and slightly know the family selling. Theres been no work done on the house in recent years. The title insurance is $1000, do we need it? Thanks!

I say yes. In an estate situation, it's possible that someone could come out of the woodwork and try to claim the house. Even if their claim isn't legitimate it could still be a big headache to deal with but title insurance would handle it. After we settled my mom's estate and sold her house, my dad (they were divorced for years) tried to do that. If I hadn't been able to talk him down, it would have been a mess. Also, there could be a mechanics lien if they didn't pay someone who did work on the house. At the very minimum, do a title search for that.

[kadams767]

Feb 20, 2020 11:19:33 GMT -5 knx9211 said:

Way back when just after I passed the bar, I did some oil and gas title work. I kind of just want to do a title search and review it to save myself the money. I am being very cheap. Hahah

I mean this nicely, and you already know this, but yes, you are being cheap.  This is penny wise and pound foolish, IMO.  While I would check the calculation (your friend is correct, title insurance rates are standard across the board and set by a state rate manual) and make sure it is correct, even $4,500 is a drop in the bucket for a $600k+ house that you are (if I am reading your post correctly) paying cash out of pocket for.  

Since you don't have a mortgage lender, who prepared and gave you the closing statement and worksheet that came up with the $4,500 quote?  Is it possible that the fee includes other customary title company fees like transfer taxes, deed recording/stamp fees?

[kadams767]

Feb 20, 2020 11:16:54 GMT -5 atarianna said:

Title insurance is up to you. I only have opted to do the owner’s policy once and it was when we had purchased a foreclosure. Otherwise, I believe the money I’ve paid for the title search etc should hopefully uncover any issues. Since yours is a cash deal, you do not need to do title insurance but can opt to do it if you want.

One thing to consider is if there was a title policy issued in the previous 10 years (perhaps when the land was purchased) which you can get at a reduced re-issue rate of about 50%.

This is very state specific and owner dependent.  There is no re-issue rate available in my state for different owners, because the insured party is different.

[knx9211]

Feb 20, 2020 14:02:22 GMT -5 kadams767 said:

Feb 20, 2020 11:19:33 GMT -5 knx9211 said:

Way back when just after I passed the bar, I did some oil and gas title work. I kind of just want to do a title search and review it to save myself the money. I am being very cheap. Hahah

I mean this nicely, and you already know this, but yes, you are being cheap.  This is penny wise and pound foolish, IMO.  While I would check the calculation (your friend is correct, title insurance rates are standard across the board and set by a state rate manual) and make sure it is correct, even $4,500 is a drop in the bucket for a $600k+ house that you are (if I am reading your post correctly) paying cash out of pocket for.  

Since you don't have a mortgage lender, who prepared and gave you the closing statement and worksheet that came up with the $4,500 quote?  Is it possible that the fee includes other customary title company fees like transfer taxes, deed recording/stamp fees?

Oh I know I’m being cheap, you’re not being mean. Ha. I recently decided to SAH with our kids so I feel cheap while buying a $650k house. SENSE. I do not make any.

We’re not genuinely paying cash. Long story short, my parents decided they can make more money giving us a normal mortgage rate of interest than their having money sit in an account so they are our “lender.” We’ll have about a $275,000 “mortgage” on the house after using a prior gift, equity in our house, etc.

The closing statement was made by the settlement company.

[knx9211]

Also I went to a random title insurance company website and put in our state and purchase price and it quoted a $3,800 premium. So I’m definitely going to ask why this is so much higher and if we can shop around.

[kadams767]

Feb 20, 2020 14:08:55 GMT -5 knx9211 said:

Feb 20, 2020 14:02:22 GMT -5 kadams767 said:

I mean this nicely, and you already know this, but yes, you are being cheap.  This is penny wise and pound foolish, IMO.  While I would check the calculation (your friend is correct, title insurance rates are standard across the board and set by a state rate manual) and make sure it is correct, even $4,500 is a drop in the bucket for a $600k+ house that you are (if I am reading your post correctly) paying cash out of pocket for.  

Since you don't have a mortgage lender, who prepared and gave you the closing statement and worksheet that came up with the $4,500 quote?  Is it possible that the fee includes other customary title company fees like transfer taxes, deed recording/stamp fees?

Oh I know I’m being cheap, you’re not being mean. Ha. I recently decided to SAH with our kids so I feel cheap while buying a $650k house. SENSE. I do not make any.

We’re not genuinely paying cash. Long story short, my parents decided they can make more money giving us a normal mortgage rate of interest than their having money sit in an account so they are our “lender.” We’ll have about a $275,000 “mortgage” on the house after using a prior gift, equity in our house, etc.

The closing statement was made by the settlement company.

Are your parents actually putting a mortgage on the property?  

[knx9211]

Feb 20, 2020 14:47:45 GMT -5 kadams767 said:

Feb 20, 2020 14:08:55 GMT -5 knx9211 said:

Oh I know I’m being cheap, you’re not being mean. Ha. I recently decided to SAH with our kids so I feel cheap while buying a $650k house. SENSE. I do not make any.

We’re not genuinely paying cash. Long story short, my parents decided they can make more money giving us a normal mortgage rate of interest than their having money sit in an account so they are our “lender.” We’ll have about a $275,000 “mortgage” on the house after using a prior gift, equity in our house, etc.

The closing statement was made by the settlement company.

Are your parents actually putting a mortgage on the property?  

No. It’ll be just a loan. Nothing is being recorded.

[kadams767]

Feb 20, 2020 14:50:58 GMT -5 knx9211 said:

Feb 20, 2020 14:47:45 GMT -5 kadams767 said:

Are your parents actually putting a mortgage on the property?  

No. It’ll be just a loan. Nothing is being recorded.

Got it. I was going to suggest that since it is your parents, if they had a mortgage, a loan policy on their mortgage would likely be cheaper and still give you the piece of mind.

[knx9211]

Feb 20, 2020 15:14:18 GMT -5 kadams767 said:

Feb 20, 2020 14:50:58 GMT -5 knx9211 said:

No. It’ll be just a loan. Nothing is being recorded.

Got it. I was going to suggest that since it is your parents, if they had a mortgage, a loan policy on their mortgage would likely be cheaper and still give you the piece of mind.

Obviously the consensus here is to get it, so I’ll definitely talk to the closing company about seeing if we can get that premium down at all. I’d hate to overpay for it.

[janegold]

If it helps, as a point of comparison, I just checked our closing statement from our new home purchase a couple months ago, and the title insurance premium was $3600.

We didn’t shop around but we were told we could. Hopefully you will be able to find something less expensive!