While a homebuyer is required to pay for the lender’s title insurance premium, the owner’s title insurance is optional to the homebuyer, and sometimes homebuyers who are looking to shave dollars off their closing costs consider opting out of the owner's title insurance policy.
They may feel having an owner's title insurance policy is not worth the expense.
A lot of misinformation about owner’s title insurance permeates the blogosphere and, in fact, one Washington DC metropolitan area real estate broker regularly advises homebuyers NOT to spend the extra dollars to purchase owner’s title insurance coverage.
Most of the blog entries by this broker are replete with misunderstandings of the coverage afforded to a homebuyer by the owner’s title insurance.
In an effort to combat these misunderstandings, I am offering an on-going series of “real life” examples of why owner’s title insurance is worth the price.
Our most recent real-life case involved a $65,000 claim and a tax sale purchase, which occurs when a government agency auctions off properties with delinquent property tax bills.
The homebuyer almost lost $65,000 in equity because of a clerical error.
A DC Superior Court judge entered the wrong date on the court order – March 15, 2009 instead of March 15, 2010 – making it appear as if the one-year statutory appeal period on the tax sale case had expired.
In this case, there would be no one for the homebuyer to sue since a clerical error by a judge falls within the "governmental immunity" category. You are not allowed to sue a judge for a clerical error.
The homebuyer in this case elected to purchase an owner's title insurance policy for $521.
Because it appeared by the court order that the one-year statutory period for appeal had expired, the title company insured title to the homebuyer. The tax sale purchaser, after the title company had completed the closing and insured the new homebuyer, filed an appeal within the new one-year statutory period and prevailed.
The insured homebuyer was notified of the order awarding the tax sale deed to the tax sale purchaser, and in turn, filed a title insurance claim. The insured was immediately made whole by reimbursement of his purchase price and actual damages.
When presented with all the information, most of our clients elect to purchase the coverage. After all, in most cases the cost of an owner's policy is a drop in the bucket compared to the down payment the homebuyer had to save to buy the property.
In this case, the homebuyer paid $521 for an owner's title insurance policy that wound up saving him from the loss of his $65,000 down payment.
Rather than asking if an owner's title insurance policy is worth the expense and advising ways to cut corners at the closing table, why not encourage homebuyers to think of the owner's policy in a different way:
What's an extra $521 at the closing table to protect the tens of thousands of dollars you saved for your down payment?
Comments(2)