Written By Joshua A. Golden, Principal at Luxury Residential Group LLC
What is Title Insurance?
Title insurance is policy that covers homeowners and mortgage companies from unknown defects in the deed. It is the responsibility of your attorney to do a title search prior to closing. Unfortunately unforeseen circumstances come up. Both buyers and lenders should have title insurance. The lenders policy only covers their portion of the mortgage. If you pay cash, or put down a large amount at closing, you should have title insurance covering your portion of the value as well.
You might ask yourself, what does title insurance cover?
Title insurance covers many things, mostly unforeseen and for a large portion uncommon circumstances. At a recent closing, the buyers attorney (Steven Ceprano of Summers and Summers in Boston) told us a story about something that happened to one of his clients:
A buyer moved forward with the purchase of a property. 1 year later a woman comes forward saying that she never authorized or intended to sell this property. Her husband at the time forged her signature while she was out of the country and she was notifying the current owners that she was taking the property back. She had a right to her home that was illegally sold. Now, had the buyer NOT had title insurance, they would have been out of luck and would have had to go through a lengthy lawsuit to get their money back. Since they did purchase the policy, the insurance company was responsible for paying them back the money they had put down on the home. The buyer was free and clear but the insurance company had to go through the process of recouping their losses.
How often does a total loss like this happen? Almost never, but is it worth taking the risk? We at Luxury Residential Group do not think so.
What is title insurance going to cost me?
Title insurance is something you pay once, at closing, and is usually $3.25-$4.00/$1,000 paid. For example, if you buy a home or condo for $425,000, you should expect to pay between $1,375 and $1,700. Although a good amount of money, it pales in comparison to a $425,000 dollar loss and covers you for as long as you and your heirs own the property.
What you should take away and Luxury Residential Group‘s two cents:
Title defects occur quite often and are usually picked up by the title examiner, hired by your attorney, and paid for by you at the closing. If a defect is found, it is the responsibility of the seller to take care of and have it removed from the title prior to closing. Unfortunately, a lot of buyers and sellers these days try to do things themselves(P&S, Closings, and filing of the deed) in order to save themselves money on closing costs and doing a thorough title search is overlooked or something that is unknown by the buyer. Buyer BEWARE, if you do this, you run the risk of SIGNIFICANT losses. You should ALWAYS hire a professional and experienced attorney. If you do not, you might find yourself responsible for paying back former owners, lenders, painters, plumbers, gardeners and pretty much any other contractor you can think of who may have gotten burned by the previous owners. You also run the risk of not only losing your property, but having to fight a lengthy court battle to get your funds back.
Some interesting news from the FHA this week. With the increased popularity of FHA in the absence of other alternative products (they now insure 30% of all new loans) FHA is nearing the limits of loans they can make based on their capital ratio. To address this problem FHA will be raising their upfront mortgage insurance premium fees from 1.75% to 2.25%. They have also requested approval to increase their monthly fees.
LRG Luxury Residential Group | 355 Boylston St, Boston MA 02116 | (617) 233-5800 | |