How many times have you gone to a closing as a listing agent and watched the drama unfold over whether or not the purchaser is going to buy title insurance? Most of the time, they are clueless about the cost and benefits. Oftentimes, the settlement agent isn’t much help because he then has to disclose that he gets to keep a big chunk of the premium as a commission. What do you do?
I am not an attorney, but I have been around long enough to know that if you are in ownership of real estate, you should seriously consider having an owner’s title insurance policy. With all the price increases over the last seven years, insurance premiums have increased too. Now they offer a scaled-down version of owner’s coverage for less cost, but if you didn’t know about it before getting to the table, how is your buyer going to make an informed decision about which one to buy?
A good example I share with my buyers involved a tract of land sold in Arlington, VA in the late 1970’s to a developer who was going to put up a building with 150 condominiums. All went well with the closing, construction and sales. In 1981, the former tract owner’s recently divorced wife discovered the land had been sold in 1979 unbeknownst to her. Her ex-husband had taken his girlfriend to closing, posing as his wife. The settlement agent had failed to verify identities of the parties to the transaction.
The ex-wife then retained a really good attorney and proceeded to file suit for fraudulent conveyance and about ten other sustainable actions. The settlement company was no longer in business. She first got a judgment against her former husband, then went after every owner in the development, giving them the option of paying her $35,000 for an efficiency (more for larger units) or turn over possession to her. As you can imagine, this created quite a stir in the real estate and legal communities, not to mention a lot of fees. For those who had purchased the owner’s portion of the title insurance, they were fully covered. Those who didn’t had to refinance, sell or default on their mortgage, since they couldn’t turn the property over encumbered. What a mess. It provided anti-real estate professional fodder for a couple of years.
When preparing a buyer for closing, I go over a sample or draft HUD-1 and, we discuss and/or clarify each item. When I get to title insurance, you know what I recommend.
How do you handle title insurance? As a Buyer Agent? As a Listing Agent?
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