Why do I need Title Insurance.

In the past I have had more than a few clients question and even decline owners title insurance. Typically the response when asked if they would like to purchase title insurance is " Doesn't my mortgage company carry that?". Well the answer to that is yes and it is to cover themselves, not you. I recently talked with one of my colleagues who provides title insurance to get an idea of just what could come back and bite you if you do not have title insurance.

The answer encompassed a lot more than I expected. Many of the things I was already aware of such as, someone else owning an interest in the title, defective execution or recordation, undisclosed liens, and claimed rights because of fraud, forgery, duress, incompetency and impersonation. There were also quite a few that caught me off gaurd, such as, lack of a right of access, unrecorded easements, zoning law or building permit violations, encroachment of structure onto an easement or over a building setback line and required removal or alteration of existing structure because any portion was built without obtaining a building permit.

Many of these issues could be settled in a Civil Court proceeding, by Lawyers making arguments and monetary compensation being determined, but just imagine buying a home and wanting to add a new deck. You go and visit your local contractor, he goes and visits the local government and obtains a building permit and builds you a beautiful new deck, perfect for all your entertaining needs. Upon completion an inspector from your local government shows up to make sure it is structurally sound and built to code. Imagine his surprise when he discovers the previous owner had built that fourth bedroom and family room, which were the deciding factor in your buying decision, without a permit. How expensive would it be for you to prove that the foundation, framing, electrical wiring, etc. are all code compliant? I expect it would greatly exceed the cost of a title insurance policy. I was really happy that I had found out more about title insurance and can discuss it more in depth with my future clients. I would hate to have a client of mine experience a scenario like this.