Upstate New York Buyers Should Purchase Owner's Title Insurance *

By
Real Estate Attorney

        In upstate New York many buyers do not purchase an owner title insurance policy. This seems to be a throwback to the days of how closings used to happen. Before the government basically took over the mortgage industry and required that borrowers buy mortgage title insurance, the cost of owners’ title insurance resulted in a custom of upstate buyers not purchasing owners title insurance. This happened in part because sellers gave warranty deeds, the attorneys actually read the abstracts of title and gave title opinions (of course their legal fees were higher as well) and the incident of fraud was low.

     Downstate buyers always purchased owner’s also known as fee title insurance. Downstate, warranty deeds were not given and sellers were more anonymous. Title insurance was the only practical way of protecting ones purchase; suing a seller on a warranty just was not a realistic option.

     Now with the requirement that borrowers purchase mortgage or lender’s title insurance for the lender, buyers should purchase owners title insurance. This is due in part to the lowered cost; a buyer receives a 70% reduction in the mortgage policy rate when they simultaneously purchase owner title insurance. This is a one-time expense.                                                                                                              

Fee title insurance can help realtors. In addition to covering title claims Fee insurance can be a deal saver on future closings. I was recently a lender attorney on a closing that couldn’t be scheduled due to a 20 year old open mortgage from a prior owner that should have been discharged of record. Of course the old bank was out of business and the prior parties were gone. Nobody wanted to put forth the effort to clean it up. If the sellers had had a fee insurance policy an indemnity letter could have been issued and the closing could have proceeded without delay. Since it was an old mortgage nobody had a loan number or a social security number or authority from the prior debtors. The mortgage rate lock date passed and otherwise unnecessary mortgage extension fees were incurred. The parties argued over the fees and the delays. The deal almost fell apart. If the deal did fall apart then the realtors would have had to start over. The realtors had to struggle to keep the sale alive. Fortuitously, the mortgage broker knew the husband of the senior partner of the sellers’ attorneys firm and made some calls and got them to move. That’s how protracted the situation had become.            

     At closing, the sellers had to place thousands of dollars in escrow; they complained throughout the closing. Escrow agreements had to be negotiated and executed. Fees increased and we still don’t know how much more the sellers will have to pay to cure title; they might have to sue, which is always expensive, to clear title. This work and expense could have all been dumped on the title insurance company and the additional expenses (which were far greater than the cost of title insurance) could have been saved. Don’t be penny wise and pound foolish; have you buyers purchase an owners title insurance policy. The deal you save may be your own.       

*Conflict disclosure. I am an examining counsel for a national title insurance company and I earn a fee for the work that I do from the title insurance company when I research and prepare (sell) a title insurance policy. However, as the title insurance rates are set by the NYS insurance department the borrower’s cost for their title insurance does not increase because of this.

                                                     

 

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Ambassador
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Good information Richard.

Welcome to Active Rain, looking forward to reading many more of your posts, let me know if there is anything that I can do to help as you get started here.
Bob

Dec 14, 2015 02:51 PM #1
Rainmaker
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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Richard. Outstanding job with your post. Your clients are fortunate to work with legal counsel that is really knowledgeable and have the best interest of the client at heart.

Welcome to Activerain, will look forward to seeing many more posts.

Dec 14, 2015 08:00 PM #2
Rainmaker
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Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Welcome to active rain. Home buyers in New York will appreciate this information.

Dec 14, 2015 08:11 PM #3
Rainmaker
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Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Welcome to Active Rain!  As REALTORS who have been here (on and off) for more than 9 years, it's well worth it!

Dec 14, 2015 09:48 PM #4
Rainmaker
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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Richard Herrmann title insurance is an important policy to purchase for Massachusetts buyers, also....it's a one time charge and I've seen homeowners using it and thankful that they had it!!!!!

Dec 14, 2015 10:03 PM #5
Rainmaker
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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

and welcome to ActiveRain....it's a great place to learn, share, market and network....and I hope you enjoy all of it...

Dec 14, 2015 10:04 PM #6
Rainmaker
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Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

I would never, never, never, ever recommend passing up on a title insurance policy.  I had to use one myself many years ago.  When I purchased a property, the title company missed a lien on the property and when I went to sell there it was... a $10,000 lien.  Didn't cost me a penny, though.  I had title insurance.  Yay for me!  

Good topic.  Thanks for the post.  

Dec 15, 2015 12:03 AM #7
Rainmaker
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Mery Fernandez Empire Network Realty Luxury Brokerage
Empire Network Realty INC. - Orlando, FL
The Rise of An Empire, Let's Build Yours!

Hi Richard! Welcome to the world of Activerain, may your blogging  create a whole new chapter in your Real Estate Career.

Dec 16, 2015 02:48 AM #8
Rainer
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Richard Herrmann
Clifton Park, NY

Thank you for your suppoirt and inspiration.

Dec 22, 2015 06:38 AM #9
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Captain Wayne - Rowlett Real Estate School
REcampus Fully Accredited Florida ONLINE & Classroom Training in Destin, Pensacola Florida - Panama City Beach, FL
Rowlett Real Estate School / Owner and Instructor

Thankfully I have not had such a mired rigmarole to deal with. I have had some inconveniences here and there, but this, this sounds horrible.

Dec 23, 2015 07:10 AM #10
Rainmaker
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Captain Wayne - Rowlett Real Estate School
REcampus Fully Accredited Florida ONLINE & Classroom Training in Destin, Pensacola Florida - Panama City Beach, FL
Rowlett Real Estate School / Owner and Instructor

Welcome to ActiveRain,  it's great to have you aboard.  I look forward to reading more of your posts.

Dec 23, 2015 07:10 AM #11
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Joy Bender
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Hi Welcome to Active Rain and Congratulations on our first blog post.  Happy Holidays Richard Herrmann 

Dec 25, 2015 02:20 AM #12
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Letitia Stevenson
BHHS Fox & Roach | www.DelawareValleyRE.com - Greenville, DE
Listing Agent DE/PA/MD, Digital Marketer & Coach

Hi Richard, I’m stopping by to say “Hi and Welcome to the Rain!” ActiveRain is a great place to share your knowledge, expertise and thoughts, as well as network and learn so much from the vast pool of talent already onboard. I look forward to reading your upcoming posts. If you would like to connect with me on ActiveRain, please subscribe to my blog! Welcome Aboard, Happy New Year and Much Success! 

Jan 20, 2016 06:52 AM #13
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