As someone who is in the process of buying a house right now.. can someone give the TLDR of what I can actually do? Refuse the title insurance? Also the bit about land trust.. does this impact my ability to be underwritten for a mortgage?
Working Title (Insurance)
71–80 of 99 posts
Re: Working Title (Insurance)
#72Earlier 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.
>What if the latest owner has a contractor’s lien on the house for an unpaid bill?
Not covered by title insurance.
>Or if they are beyond on their property taxes?
Specifically not covered by title insurance.
>Or going through a messy divorce?
Not covered by title insurance, nor would this scenario matter since the owners are known.
>Or get an unexpected large medical bill that finalizes as a financial judgement against them?
Not covered by title insurance.
Hope I cleared that up. Title insurance is a legalized scam with a market cap in the billions.
Re: Working Title (Insurance)
#73I disagree with the author a bit here. You are paying for title insurance mostly to buy the expertise of a local title agent who knows how to look up things locally. There is no national database that is up to date and trustworthy for this. To be even close to accurate, you need to check the source of truth for property deeds, transactions, liens. You need to check various level of governments if taxes are up to date…
>You are paying for title insurance mostly to buy the expertise of a local title agent who knows how to look up things locally.
No longer true. Almost all title shops subcontract this out to small software companies that scrape public records and return an "all good" if nothing shows up. This query is usually done by a teenager or early twenty-something in a call center with zero experience, just data entry.
>There is no national database that is up to date and trustworthy for this. To be even close to accurate, you need to check the source of truth for property deeds, transactions, liens.
Sure there are, they're just private. Think LexisNexis.
>You need to check various level of governments if taxes are up to date. If they are not, there may be an implied lien.
Tax liens are not covered by title insurance.
Re: Working Title (Insurance)
#74Earlier quoted context omitted.
He also was probably not financing the purchase with a mortgage.
I’m very curious to know how many flippers are on the books with FHA. Definitely a nonzero amount. Who’s really checking up on owner occupancy? Like 4 overworked feds in DC?
FHA loans can't be used for investment properties. You must move in within 60 days and retain residence for one year.
The only exception that I know of is if you buy and move into a multi-unit building and occupy one of the units yourself.
If you obtain an FHA loan, you are attesting an intention to comply with these requirements. Going into the loan with the intention of selling quickly (not occupying and or flipping in less than a year) exposes you to charges of fraud.
Re: Working Title (Insurance)
#75The more I learn about real estate the less inclined I am in participating. I'll probably rent for the rest of my life.
I would say you're missing out, but it really depends on the things you value in life.
That said, I've known people who regretted buying a particular piece of property, but I don't think I know anyone who regrets not having a landlord anymore.
Re: Working Title (Insurance)
#76Earlier quoted context omitted.
As a practical matter I think this mostly confuses adverse tenancy with adverse possession. The latter case, of squatters gaining full legal title to a piece of property, is extraordinarily rare, and as I understand it the cases all tend to be marginal (like: abutments of adjacent rural properties changing hands). Adverse tenancy is somewhat more common: you can establish through your actions an expectation that you'…
I think that the case that Patrick describes leads straight into the intended case for adverse possession. You need to extend the timeline a litte. Okay, so Bob owns a house. Bob marries Jane in an ill-advised, quickly ignored ceremony, but never gets formally divorced. Bob sells his house (in a community property state) to Ted. Ted lives in the house for 20 years. Jane dies. Jane's son Rick goes through her stuff, r…
I did gopher work for Title Insurance company one summer. This type of stuff is so common in certain areas. Another common one we saw similar to "X party has claim no one realized" was "Property was passed down generation from generation and now someone wants to sell it and lack of clear title emerges because property is still in long dead grandparents name."
Re: Working Title (Insurance)
#77I regret paying extra for buyer's title insurance on my home. (In my state, this is separate from the lender's title insurance policy.) I got sued a week after closing by someone with a meritless claim against the sellers, whose lawyer admitted they only added me to the suit "to put pressure on to settle." I paid over $10k in legal fees and got $0 back from the insurance policy. (The claims against me were dismissed on summary judgment as a matter of law, and the sellers eventually won at trial, and later again on appeal, on the remaining claims.)
Just as frustrating, the title company knew about the claim before closing but didn't see fit to tell me. (They asked the seller to indemnify the title company—not me—from potential lawsuits, but the seller refused. The sale closed anyways, with none of this drama on my radar until well into the proceeding lawsuit.)
The reason the policy was worthless was that it had a very narrow definition of what constituted a title defect, and it would have involved another expensive, uncertain battle in court to try to establish that the lawsuit against me should have been covered. It was better to just eat my legal fees and treat them as part of the purchase price of the house.
Re: Working Title (Insurance)
#78I regret paying extra for buyer's title insurance on my home. (In my state, this is separate from the lender's title insurance policy.) I got sued a week after closing by someone with a meritless claim against the sellers, whose lawyer admitted they only added me to the suit "to put pressure on to settle." I paid over $10k in legal fees and got $0 back from the insurance policy. (The claims against me were dismissed…
You paid ten grand in legal fees for a suit that was summarily dismissed? Sounds like not only were you fleeced by the title insurance co, you were fleeced by your attourney too! Maybe there is some reasonable explanation for the high fee, but I am having trouble thinking of what it might be.
Re: Working Title (Insurance)
#79The last time I bought a house (this was in California) I read the title insurance policy (as the author says, it's short). Turns out it protects my claim in perpetuity meaning that when I sell the property I am still covered against any claims later brought by the buyer or their insurance company. Obviously therefore I don't need the insurance: in the very unlikely case title might be challenged I can always just su…
I guess they could have just charged you a fee for conveying the title equal to what they would have earned on the insurance premium, did you ask them yhem to do that?
It is pretty silly if CA requires a title company to do that. I have transferred titles in my state myself, here, I just take the title to the county and pay a small fee to have it recorded.
Re: Working Title (Insurance)
#80Bureaucracy is, among other things, Someone Else's Moat.
As in, Title Search and Title Insurance could be treated as a Public Good and administered by a government entity (shock, horror!).
But people are making a lot of money off of it, so there is a bureaucratic moat.