Wednesday, June 25, 2008

We don't need no stinkin' title insurance

Most purchase agreements in the Illinois portion of this area obligate the seller to provide either an abstract or a policy of title insurance to the buyer. If your purchase agreement does not, negotiate for title insurance. If your agreement leaves the option up to the seller, negotiate to get the title insurance. If the seller refuses, buy it yourself. The price depends on the purchase price of the real estate. But unlike most insurance policies, this one is good as long as you own the property. It does not matter if you live there for one year or fifty years. Once the premium is paid, you are covered until you sell the property.

DO NOT let anyone tell you you don't need it. You might hear that it costs too much, the bank is doing a title search, the bank's lender's policy will protect you, or any number of other excuses. All are wrong, wrong, wrong.

Here's a recent horror story, from the Columbus Dispatch:

Family in Ohio buys a house from a Doctor in 2001. The Doctor had a couple of mortgages on the property. The County Recorder entered the Doctor's name wrong in the computerized index on one of the mortgages, so when the title company went to search the records, they did not find this mortgage (don't know why they didn't search the property index--maybe they don't have one in Ohio?). The Doctor didn't see fit to mention this oversight at closing, and it was not paid out of the settlement funds. It appears that the mortgage was for a line of credit, so the Doctor actually paid on it for a few years. Apparently the Doctor ran into a bit of a financial difficulty, and stopped paying in 2007. Now that lender is going to foreclose. All the buyers got was a title search, which is not insurance, and now the buyers stand to lose their home.

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