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Working Title (Insurance)

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Re: Working Title (Insurance)

#51

Post by Terr_ »

rtpg wrote: post #27
gwern wrote: post #23

Earlier quoted context omitted.

That's an interesting argument. My intuition would've been the opposite: the title is much more likely to be dirty. 3 quick transactions in under a decade (and a fourth ongoing) means that many more opportunities for problems. Each transaction is a new opportunity involving a whole new set of people to be engaged in fraudulent conveyance or have a spouse pop out of the woodwork (as mentioned in OP). Maybe he figured…

Patrick's point about off-record transactions feels important here. Each on-record transaction leads to an opportunity for off-record transactions to be discovered! On-record ones are likely clean in some sense, whereas 10 years of no real estate on-record transations means nobody has looked. But to your point... the more people involved, the more moving parts involved.

> Each on-record transaction leads to an opportunity for off-record transactions to be discovered

On the other hand, I would expect both types to correlate with one-another, tied together by a shared factor of "activity level."

Re: Working Title (Insurance)

#52

Post by Scubabear68 »

kelnos wrote: post #20
HeyLaughingBoy wrote: post #9

My real introduction to Title Insurance came not when I purchased my first house, but as I sold it. The buyer was an experienced builder who was buying the house (in a fairly desirable area of the city where property was appreciating quickly) in order to add upgrades and flip it. When his agent asked why he had crossed out the line for title insurance, he retorted, "that property's been sold three times in 10 years.…

The question is also who will be left holding the bag. If title searches over the past 10 years have turned up nothing problematic, then likely when the flipper sells, their buyer's title search won't turn up anything either. And once their eventual buyer buys the house, it's their problem (not the flipper's) -- well, their title insurer's problem -- if a title dispute comes up later. And given that the flipper's goa…

The flipper will be left holding the bag. The 10 years of prior searches won’t help you if the last owner snubbed a contractor and had a lien slapped on the house. Or a number of other scenarios.

The title company won’t issue the insurance if it finds issues like this. It will issue a list of items to clear before they will issue the insurance. It is generally up to the owner (eg the flipper) to cure the issues.

Re: Working Title (Insurance)

#53

Post by pavel_lishin »

ipython wrote: post #6

I always thought of title insurance as a complete farce. However, I did end up with a scenario where title insurance paid out (to me) to the tune of several thousand dollars when I was sued by a neighbor. The neighbor accused me of infringing on her property. I, in turn, proved (enough to the title insurance company, anyway) that the neighbor had also infringed on my property, and had done so in an invisible way (und…

Can you say more about the presumably secret tunnel your neighbor dug under your house?

Re: Working Title (Insurance)

#54

Post by ipython »

pavel_lishin wrote: post #53
ipython wrote: post #6

I always thought of title insurance as a complete farce. However, I did end up with a scenario where title insurance paid out (to me) to the tune of several thousand dollars when I was sued by a neighbor. The neighbor accused me of infringing on her property. I, in turn, proved (enough to the title insurance company, anyway) that the neighbor had also infringed on my property, and had done so in an invisible way (und…

Can you say more about the presumably secret tunnel your neighbor dug under your house?

Not a tunnel, an invisible fence line.

Re: Working Title (Insurance)

#55

Post by toomuchtodo »

Scubabear68 wrote: post #49
toomuchtodo wrote: post #31

Earlier quoted context omitted.

I do not buy title insurance on investment properties if the last owner had a mortgage. If the title commitment was good enough for the bank, it’s good enough for me. I build the potential clouded or impaired title into my risk model. (I’ve also filed public comments with the CFPB on title insurance being junk fees [1], full disclosure) [1] https://news.ycombinator.com/item?id=40524304

What if the latest owner has a contractor’s lien on the house for an unpaid bill? Or if they are beyond on their property taxes? Or going through a messy divorce? Or get an unexpected large medical bill that finalizes as a financial judgement against them? Clean title from other owners tells you only a limited story. The current owners can completely trash the title but still have an existing mortgage.

> I build the potential clouded or impaired title into my risk model.

This is built into my acquisition price. Across hundreds of transactions, I have yet to experience a loss. I’m effectively self insuring against the risk, vs the cost I would’ve paid for title insurance (which would work out to tens of thousands of dollars in aggregate).

Property tax payment status, divorce cases, mortgages, and mechanics liens are all public record and can be searched for as part of researching a property. If the claim is public, I can settle it as part of the transaction on the settlement sheet with the settlement agent (who will disburse funds accordingly and handle recording/releases in concert with my real estate attorney). Unrecorded potential claims against the property are very rare in my experience. That isn’t to say it can’t happen, but only that if it does, I’m likely still coming out ahead over the long term.

Re: Working Title (Insurance)

#56

Post by sjy »

chris_armstrong wrote: post #29
djfergus wrote: post #24

Earlier quoted context omitted.

And yet my conveyancer (WA) last year still tried to hock me some expensive additional title insurance. My line to her was “this sounds like it’s protecting me from you not doing your job”. I don’t recall the response but it was unconvincing.

You’d think conveyancing would be cheaper here, but you’re still spending $2-3k on who knows what to transact property. At least the process is quick and final compared to the mess in other common law jurisdictions

That's partly because the dominant platform for electronic conveyancing, PEXA, has a monopoly. Only licensed professionals who pay subscription fees can access PEXA. This removes competitive pressure on conveyancing fees because self-represented buyers must use a slower, riskier, non-standard paper process.

https://www.afr.com/companies/financial-services/nsw-product...

https://www.productivity.nsw.gov.au/market-study-on-econveya...

Re: Working Title (Insurance)

#57

Post by zinekeller »

paulgerhardt wrote: post #15

I recently performed a title search on a property going back to the 1820’s - the land was issued to the original owner by James Monroe and the buck stopped there. An acquaintance performed a title search on another property going back to the 1100’s. They found a serious black and white error circa 1225 which voided the entire chain of claim. They did not report the error.

> An acquaintance performed a title search on another property going back to the 1100’s. They found a serious black and white error circa 1225 which voided the entire chain of claim. They did not report the error.

If this is the UK and the land-in-question is registered in the records held by the HM Land Registry, the black-and-white error is already void only recently-ish (Land Registration Act 2002 gave a 10-year "last chance" claims for very old deed errors, and the error you mentioned is now extinguished). Even if if was reported by your chap, HM Land Registry will just shrug because it literally has no legal effect now.

Re: Working Title (Insurance)

#58

Post by SkyPuncher »

Scubabear68 wrote: post #49
toomuchtodo wrote: post #31

Earlier quoted context omitted.

I do not buy title insurance on investment properties if the last owner had a mortgage. If the title commitment was good enough for the bank, it’s good enough for me. I build the potential clouded or impaired title into my risk model. (I’ve also filed public comments with the CFPB on title insurance being junk fees [1], full disclosure) [1] https://news.ycombinator.com/item?id=40524304

What if the latest owner has a contractor’s lien on the house for an unpaid bill? Or if they are beyond on their property taxes? Or going through a messy divorce? Or get an unexpected large medical bill that finalizes as a financial judgement against them? Clean title from other owners tells you only a limited story. The current owners can completely trash the title but still have an existing mortgage.

The tax stuff is all public record - easily verifiable. Deaths are also generally publicly verifiable.

The rest of the stuff would essentially require intentional fraud by the seller. You’d be able to recoup most of those costs via court. Annoying for a private individual, but I tolerable as part of a portfolio.

I’ll be real, you can pretty quickly tell the type of person you’re dealing with in a home sale. The people who have a tendency to “trash their title” also show other signs of untrustworthiness during the transaction.

Re: Working Title (Insurance)

#59

Post by eadmund »

pjc50 wrote: post #45

> Many people, when they learn about land trusts, immediately assume that something extremely hinky is going on. Not so much; this is an extremely common way for savvy people to own property. It is in no way a loophole. I'm inclined to disagree with this. One of those "not everyone doing it is up to no good, but everyone who is up to no good is definitely doing it" things. Obscuring ownership makes it a lot easier to…

> One of those "not everyone doing it is up to no good, but everyone who is up to no good is definitely doing it" things

That applies to breathing, eating, sleeping: not everyone who breathes is up to no good, but everyone who is up to no good is definitely breathing!

Re: Working Title (Insurance)

#60

Post by NoboruWataya »

xivzgrev wrote: post #41
HeyLaughingBoy wrote: post #9

My real introduction to Title Insurance came not when I purchased my first house, but as I sold it. The buyer was an experienced builder who was buying the house (in a fairly desirable area of the city where property was appreciating quickly) in order to add upgrades and flip it. When his agent asked why he had crossed out the line for title insurance, he retorted, "that property's been sold three times in 10 years.…

What does he care? He’s flipping it. In the off chance there’s an actual title issue it’s unlikely to occur during the short time he’s holding

His buyer will also check the title before buying, so the point is that if there is an issue with title he won't be able to flip it.
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