The following is a true story that happened here in Charleston, SC --- if this can happen in Charleston, SC, it can happen anywhere:

There was a FSBO (for sale by Owner) sign on an ocean front lot on the Isle of Palms. Potential purchasers (we will call them, the Browns) called on the lot and discovered that they were only asking $500,000 when all other ocean front lots were going for pretty close to $1,000,000. The Browns got really excited- asked the "sellers" why it was being sold so low and the Browns were told that they had financial difficulty, so needed to dump the lot. The Browns wrote a cash offer to close quickly --- they did not want to miss the great opportunity.

The Browns selected an attorney to handle the closing for them. During the title search, a small red flag appeared and the title searcher sensed something wrong. The attorney had the police at the closing when the "sellers" walked in. The "sellers" were not the real owners of the lot. The actual owners of the lot lived out of town and knew nothing about this sale. By the way, the "sellers" had fake identification.

Now, had this attorney not sensed something wrong and had closed the deal, the buyers would have been out of $500,000. Also the buyers, if they had not purchased owner's title insurance, they would have been at a total loss. However, if they had purchased owner's title insurance, their investment would have been protected by the owner's title insurance.

As I have said, every purchaser needs owner's title insurance. If the purchasers are financing the property, the lender is going to require Lender's title insurance. I tell buyers all the time, "Hello!!! why do you think the lenders require title insurance?"

If the owner's title insurance is purchased at the same time as the lender's title insurance, there is a reduced fee for the purchaser (called a simultaneous issue)

For goodness sakes, all you Realtors® out there, be sure that your purchasers obtain owner's title insurance.

Will have another story for you tomorrow.

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Liz Loadholt

Broker, SC Certified Trainer, Relocation Director
Co-founder of AgentOwned Realty ]

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Posted by Liz Loadholt Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC on 08/15/2010 04:42 PM

Comments (61)

Mama Liz Says - Why Do You Need Owner's Title Insurance? in the Training Channel

for sale by owner, fraud, fsbo, lenders title insurance, owners title insurance, simultaneous issue, title insurance, why title insurance

Originally posted at: Mama Liz's Blog: Mama Liz Says - Why Do You Need Owner's Title Insurance?

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61 Comments on Mama Liz Says - Why Do You Need Owner's Title Insurance?

AUG

2010

Hello Mama Liz: If I read the story correctly the closing never happened, money did not exchange hands, and the buyers were "saved" by the closing attorney not the tile insurance. Did I miss something?

Fraud is everywhere. You have to be Alert at al times.

Liz - I recommend that everyone purchasing real estate buy an owner's title policy. It's inexpensive insurance that can save your financial life!

It's a good thing...and good advice mama. :)

Momma always knows best :) For new home owners especially it's important to explain the importance of buying homeowners insurance.

Thanks quite a story, Liz! And I agree… always, always get owner’s title insurance.

I once had a seller in a mobile home park where you own the land. She too had purchased it via a FSBO. I asked her for a copy of the mobile home title (just like for any vehicle). Oops, she had never had the seller transfer it into her name. How about the deed. Oops again, it had been written by some attorney in Indiana and we are in Florida. The deed needed two signatures of witnesses and this one had only one so the title company would not accept. Basically, this lady paid 30K for the home and had put 20K into it, and did not have ANYTHING on paper to prove it. Luckily I was able to steer her to a good attorney and he straightened it out, for a cost of course a couple of months. And can you beat this, the seller wondered why we could not straighten out the problem of deeds, titles, dead previous owners, etc instead of using an attorney. By the way, the previous owner had also neglected to give her the lead disclosure (or any disclosure) as mandated by law since the home was constructed in 1972.

Sometimes you wonder if people every learn from their cheap mistakes. They will lose thousands to save $10! Amazing. She was very lucky the previous seller was willing to cooperate and was still alive. In retiree subdivisions, that is not always the case.

PS And here traditionally the buyer pays for the owners policy and the commission, so she had saved nothing by not using an agent, even with a FSBO. I would have NEVER allowed her to have an Indiana company close the deal, let her take possession with no title, and without title insurance. The title company's underwriters and attorneys do not let much get by them. That is why they do not have to pay off as often as one would think.

Good advice, it's a small fee for something that could cost much more without it.

Liz, besides being great insurance for your hard earned invested money there are so many scams out there it's additional protection just in case the buyer balks...thanks for the post

Well said Mama Liz - insurance is the best policy...

I have been involved with enough seller who purchased from "private sales" to know title issues always lurk for those that don't look. I have had to chase discharges from banks after they were paid off...and mailed to the prior owner...who said I don't need this anymore...I don't own that place, and in the trash it goes.

In our market, the seller normallly pays for the owners title policy, and the buyer pays for the lenders title policy. Even if the buyer had to pay for the owners policy, I agree that it is absolutely necessary.

Right on! Don't forget to ask about the Homeowners policy that can provide post policy date protection -- worth to have as claims usually don't occur for three to five years down the road.

There are many scams going a round and this seams to be one of the bigg ones. It is one of many many reasons to have the title ins.

Great post, Liz. The scammers are getting more creative, more daring.

People just seem to think that selling or buying a home is the same as purchasing a loaf of bread at the store or even a car. They have no idea what is involved. I this were members only I might even say a bit more.

Wow, this scam is very interesting to read after what just happened in Panama. A man nick named "Wild Bill" was scamming people here, in Costa Rica, and I think Mexico. BUT, he was crazy and was killing the owners of the land and because the title of property in Panama is owned by corporations and annonymous, would get a hold of the corporation and say that he bought that property with cash and the owner took it and skipped town.

This just came out in the news-

Wild Bill,” a suspected US serial killer accused of killing at least five people in Panama, was locked up along with his wife in Panama City on Wednesday. The couple allegedly made friends with wealthy US citizens and offered to buy their property before killing them and burying them in the garden of their hostel on the Bocas del Toro Atlantic archipelago. They then took over their property deeds. William Dathan Holbert, 31, was taken from custody to the La Joya prison in the Panamanian capital, police sources said. Police transported his wife, Laura Michelle Reese, 27, to a female rehabilitation centre, the sources said. The couple had fled to Costa Rica and then robbed a boat to travel to Nicaragua, where soldiers picked them up on July 26. Three days later they were transferred to Panama to face murder charges. They are accused of killing Cheryl Linda Hughes, Bo Barry Icelar, and Michael Brown and his wife and son, whose remains were found on the property. Authorities suspect there could be more victims, perhaps in other countries. “Wild Bill,” who used the false name Adolfo Cortez Reese and was said to admire Adolf Hitler, confessed to killing the Americans but denied accusations of killing two Panamanian workers, legal officials said.

The scary thing is that I think he was originally from South Carolina. Title Insurance is SOOOOOOOO Important! Thank you for posting this info.

~Mara

This is a great post, and I hope all the agents reading it take it seriously. Although the vast majority of closings have no reprecussion, I have seen some really blow up - people are spending a lot of money on their homes and they are gambling on losing a lot if some problem does come up later with the title.

For 1983 until 1991 I worked in the title insurance industry - the first five years were actually working for attorneys handling closings and then I went on to Chicago Title Insurance Company where I did some commercial closings and also was an agency auditor and representative. On a number of occasions I heard agents tell their buyers that they really didn't need title insurance - that it was just a waste of money. Where they got this idea I have don't know except their mentors may not understand it either, but one of the things that I have noticed over the last 30 years is that somehow the agents have often taken it upon themselves to "save" their buyers money - often I have wondered if it was because they wanted to look important. They would recommend the buyer's go to the cheapest closing company, get the cheapest home inspector, etc. What a huge mistake, and not only are they doing the wrong thing but they could be really hurting their clients.

After seeing all the problems that I came across, I would NOT ever consider buying a home without also getting owner's title insurance. What a lot of people don't seem to realize is the Mortgagee title insurance only covers the loan - it is a decreasing insurance so as the loan is paid off, the amount of insurance goes down. At the same time, the lender is only interested in getting any problems fixed that pertain to the loan - they are not going out of their way to help the home owner. On the other hand, owner's title insurance often has an appreciation clause (not that most of us need it right now) and will often cover any out of pocket expenses that the owner would have to pay were he to have a problem - that insurance covers the difference between the existing loan balance and at least the contract price of the home.

The longer I am in this profession, the more I realize that agents NEED to understand how all the other associated businesses connected with the purchase of a home fit in the puzzle. The settlement company carries a lot of responsibility and does a lot more work than just going to the closing table. The mortgage companies also have a lot more to do than just taking a loan (I was also a loan originator for 4 years) I think it should be mandatory for all agents to learn what happens in the background - I believe it help the reputation of the industry and it would get all sides working together. Having been in sales, brokerage management, mortage loan origination and closing work along with being married to a home inspector, I have a very clear understanding of how it all goes together and would like to see that aspect passed on to all agents.

I'm curious as to what was the red flag. The first thing that comes to my mind would be that there was a large mortgage on the property. But your main point is dead on. In Colorado, it is most always the Seller who provides the title insurance policy, but the buyer should have one, even if they have to pay for it themselves. Great example!

Liz, this is an amazing story and perfect example of why every buyer needs title insurance, regardless of whether they are paying cash or not. We always put it in our contracts. Every buyer needs protection.

AUG

2010

If it is too good to be true.... it probably is

Hi Liz -- This post also illustrates why a good buyer's agent, if in the picture, could have added a lot of insight into this even BEFORE a purchase offer was written. Great advice.

In eight years of real estate, I've had ONE buyer refuse to purchase owner's title insurance. I made her sign a statement that she refused to purchase it against my recommendation.

What an amazing story. Jeezz - takes all kinds, yes?

GREAT job on the video also!

Liz,

Now that is bizarre. It couldn't happen in Canada though, too many regulations in place.

Liz, Title Insurance and a Real Estate Attorney to review is critical in every transaction. Especially short sales and foreclosures. When nothing occurs, title good etc...sometimes they have to be reminded, what could have happened.

Liz:

The protection that an owner's title insurance policy provides is well worth the money. So many people want to skimp on this and I advise them not to.

Liz: I have had FSBO's scuff at me about the need to use a real estate agent, and there arrogance stems from the fact they have purchase homes in the past without using a broker In these times I would not trust not using a real estate broker.

A definite MUST. I hold a title license as well and I can tell you some amazing HORROR stories. Don't even think about not having title insurance!

Wowsers! That is wild crazy stuff! Congratulations on the gold star!

Rugg ---- thanks for stopping by -- you did not miss anything -- I said had the closing taken place and had the new buyers not bought title insurance, they would have been in trouble.

Jesus --- thanks so much for stopping by -- problem is that even when you are very careful, you can still get scammed.

John --- you are so right -- inexpensive and can save your financial life.

Sally --- thank you for stopping by -- I agree --

Kai ---- thanks so much for stopping by -- and thanks for always recommending owner's title ins.

Bill ---- thanks for your comment -- glad you agree with me.

WOW, John ---- thanks for sharing your story --- you make an outstanding case for using a Realtor --

Christa and Ginny ---- so glad you agree with me about owner's title insurance --

Kathy --- hi, there --- haven't seen you in awhile ---glad you agree with me here.

Steve ---- thanks for your input --- I like hearing from folks like you with your experience -- it just reinforces what I have to say about owner's title ins.

Maureen --- interesting -- in SC, the buyers pays for both the lender's and the owner's --- it is always tempting for them to NOT pay for the owner's

Scott --- thanks for mentioning the homeowner's policy --- I do not know about this, but will check this out with our Allstate partner

A good title agent is an integral part of your malpractice insurance or E&O loss prevention program. A good title agent will save your clients, and you, much agita down the line. Better to discover a problem while it is still the seller's problem than inherit the problem.

I recommend all my clients also get new surveys. I have avoided more post-closing problems because of a new survey than you can imagine. Last month a surveyor using today's technology determined that a house foundation was located 8" inside a utility easement. The house was built in the mid 1980's. The lot is very smalll and the builder had about 24" total leeway to fit the house between 2 easements. My surveyor was adamant that the house was located within the easement and that the 1980's survey was wrong (many people have speculated that the prior surveyor "fudged" the survey so that the builder could get a Certificate of Occupancy and close). The title underwriter refused to insure title and my client's got their downpayment back. Thankfully my clients did not want to a few bucks by having a title company personal inspection using the old survey or getting a survey endorsement that protects only the mortgagee.

We are seeing many scams and most are with cash transactions. If the deal sounds to good to be true it probably is. It is very important to have Title Insurance, thanks for the post! It helps show the value of a respectable title company and title insurance!

Liz - AMEN and AMEN! Your post should be told to every buyer out there that disputes the need for title insurance...

William, Fred & John --- thanks for stopping by --- glad that you agree with me regarding the importance of title insurance

Mara --- I did not know about Wild Bill -- that is just awful -- I certainly hope he is not from SC

Ellen --- I'm so with you on this --- our company offers mortgage, insurance, title insurance, home warranty and even business brokerage --- having knowledge of all these different businesses certainly makes the agent a better well rounded agent.

Eileen --- I don't know what the red flag was -- I just don't remember. Thanks for stopping by.

Fran & Sharon, Mel & Gretchen & Chris --- thanks for stopping by and for your comments.

Lori ---- well, I would say that you have a great track record --- good for you --- I hear we have a common friend -- Jeremy blanton

Liz: This is somehthing that we all take for granted but like all insurance when you need it you really do need it! Great explanation that held my attention!!!

terry --- I hope that it doesn't happen in Canada --- but I bet someone can figure out to do it.

Missy & Claudette --- thanks for stopping by and for reinforcing my opinion.

Lorianne & Loretta --- thanks for your comment -- I'm with you 100% on this.

Dixie & Dick --- I know, can you believe there are still agents out there not recommending owner's title ins.?

Jeremy --- thanks for all of your help --- you are the one who told me to write these posts this way --

David --- wow -- you are soooo right --- I always tell my agent-owners to for goodness sake, recommend that buyers always get a new survey -- amazing how many attorneys will tell buyers they do not really need one -- gives me the shivers.

Kristin, Deb & Brent ---- Oh, yes --- owner's title ins is so critical -- thanks for stopping by.

Jane --- thanks so much for stopping by and for your very nice compliment --

AUG

2010

If mama Liz says it is......then it must be

AUG

2010

Richie --- aren't you funny!!!!! Thanks for stopping by, though.

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Liz Loadholt Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC

Mount Pleasant, SC

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