Let me start by saying that, in spite of what some consumer advocates say about title insurance being sort of a rip off, I've always purchased the stuff. I figure that it's like the life vest below the seat on an airline flight. I'll probably never need it, but if I do, I'll really need it.
There is a piece in today's Washington Post by Harvey Jacobs, a local real estate attorney who, if he or his firm does settlements, has an interest in everyone buying both lenders and the new "enhanced" buyers coverage. Still, he does a great job of explaining how title insurance works and why it's a good idea.
Title insurance is not the biggest, but certainly a significant part of buyers' closing costs. And if you buy the "enhanced" coverage, it's even more.
And there is one issue that I still don't get.
In his article, Jacobs suggests that the foreclosure crisis makes it important to buy, not only the buyers' coverage, but the more expensive protection.
So my question is, why doesn't the normal coverage, which was all that you could buy until a few years ago, cover buyers who may have purchased a dodgy foreclosure. If the proper procedures were not followed, and if somehow the previous owners were able to recover the house, wouldn't the new buyers be covered with a buyers' policy? Or is there a whole new can of worms about to pop open?
So is the enhanced coverage just a way for the title insurance company to make more money? Or is it something that we should recommend to our clients?
I'd love to hear from anyone out there who really understands this stuff.
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