Why you shouldn’t buy an Owner’s Title Insurance Policy
In purchasing a house, you often run into a big ticket closing item that could cost you $3000+. Here’s some background about Home Owner’s Title Insurance Policy: https://www.zillow.com/home-buying-guide/what-is-title-insurance/ Even though this is an optional item (not required by your lender or by anyone), your escrow closing company will add it to the closing disclosure by default. And removing it requires written approval by both buyers and sellers and sign a disclosure with a long list of warnings and they will double the price of the lender’s title policy as a result of not purchasing the owner’s policy. Once you have the thought of removing, your agent and your title company will all get nervous and pressure you into buying by threatening delay in closing (I now refuse to work with any agent or closing company that would pressure clients into buying title insurance. That’s a big red no no flag about their ethics) Why? Because that’s the fattest and easiest money in the transaction they could make and for 99% the case they put their interest above the clients. What are the chances of a stranger knocking on your door to sue you for title? I have purchased and sold multiple properties in different states and never had an issue. In rare case when issue does arise, the lender has 80% interest along a lender policy, they will fight the case to protect the majority of the interest. I’m pretty pissed by MANY old schoolers telling me you need owner’s title insurance policy. I tell you you don’t and i have 90% confidence this is a big SCAM in this country. When incident does happen, they will pull out all the fine details to get off the hook so in the end, no one will give you a shit. (eg past property repair for $5000, got paid for $500 by insurance, WTF!) Your thoughts?
Zillow
I don't care about it as I usually buy 500k+ property and if I sell it later I have CYA and ease of mind that nothing was screwed up for a few thousand in insurance that I might have unintentionally passed on and the next buyer would discover and nix the deal. It's just more hassle for both me and the seller to sign a separate agreement on nixing title insurance and I just want the deal done cleanly instead of worrying about a few thousand.
Good point! I’m mostly looking at 1.5M+, but i’m a down to earth saver and a few thousands is a few thousands that could buy you a top-line sofa set and a dining set...why throw the money down the drain?
In a world of perfect records and harmonious altruism, title insurance would be unnecessary. In reality, a couple thousand bucks is a minuscule amount to pay to protect the largest investment most people make in their lifetime.
I actually had this issue come up in a survey/land dispute and it was very helpful. Agree for your typical 1/8 acre suburban house with clear history it’s not a big deal. I have easements and the property had a history of disputes. My bank was willing to acquiesce 2 acres, because it was immaterial to the total improved value; insurance covered the dispute.
My point is for standard residential home transaction, title dispute is rarely an issue. If it is, you would know it early in the process so in those rare cases, you should buy it just to cover the basics. For others, don’t bother and save your thousands of $ for other things.
My transaction was a standard residential transaction and it came up during a reassessment for property taxes several years later. I ultimately agree with you for the general case, but I would hardly qualify it as a scam or a meteor-level rare event. Our service here is regulated by the state so the price is the same (still thousands) no matter the supplier.