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Old 08-03-2015, 11:40 PM
 
27 posts, read 70,495 times
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I'm buying a new house in Caballo Ranch in Leander. I'm required to pay for title insurance for the lender. Do I really need to get it for myself as well? What are the chances that a subdivision which was previously vacant acreage will have title issues? I could really use that money towards something else.
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Old 08-04-2015, 12:40 PM
 
Location: Dallas/Ft. Worth, TX
3,037 posts, read 8,319,148 times
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Quote:
Originally Posted by northatx View Post
I'm buying a new house in Caballo Ranch in Leander. I'm required to pay for title insurance for the lender. Do I really need to get it for myself as well? What are the chances that a subdivision which was previously vacant acreage will have title issues? I could really use that money towards something else.
The owner's title insurance policy is a matter of personal comfort but well worth considering given the small cost (typically a very small percentage of the lenders title policy). You should obtain a copy of the lender's title policy, read it closely, and digest it well as it is a real eye opener. The lender's title policy will do very little to protect you in the event a title or other covered issue occurs. For example if some type of lien or claim is placed on your property that can not be enforced under other protective laws until you sell the place the lender's are not going to care much as long as you are paying the mortgage. If something occurs to your property value that might have been covered under an owner's title policy again the lender doesn't care since you're still on the hook for the mortgage either way.

The chances of anything actually occurring are very small to even nil. However some issues just can't be foreseen and with the way our world is anymore people, businesses, and groups are using the laws creatively in any way they can to profit and they don't really care who gets hurt in the process. For example Texas itself was basically nothing more than huge land grants originally that have been broken down many times over. Each time over the decades (and even centuries) the titles have become more and more murky and that even includes lost site of right of ways and other potential land grab/extortion situations.

The owner's title policy, if a good quality, is there to help protect you from many possible conditions/events.
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Old 08-04-2015, 12:58 PM
 
847 posts, read 762,427 times
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It is like any other insurance.

you buy it because if you lost the principle it would really cost you.

my guess is that if you buy 200-400K house you really would want to spend a 1000 bucks on title insurance just in case.

however the chance of your house of being caught in a fire is probably a lot more than the chance of you being caught in a title issue. atleast in Austin Area.
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Old 08-04-2015, 04:09 PM
 
3,423 posts, read 4,412,251 times
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Why do you think the lender seeks title insurance? Perhaps to protect the security interest for the loan? So you have a lender that already has a "promise to pay" from you, and a security instrument which identifies your house as collateral for that loan, and yet also wants a title policy to protect their security interest. Good luck finding the seller if you ever have to defend title to your house. Good luck expecting the seller to pay to defend the title (which the seller usually warrants in general and special warranty deeds). If you buy in a new subdivision, you do realize that the developer's and builder's financiers have liens that you take subject to unless such liens have been released? Are you competent to take care of getting a release of those liens at closing? Are you comfortable that the title company that tells you to hurry up 'cause they've only got 15 minutes due to another closing is competent enough to ensure all such liens are taken care of? What is your recourse if they haven't or didn't and the developer or builder declares bankruptcy?
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Old 08-04-2015, 07:08 PM
 
Location: Holly Neighborhood, Austin, Texas
3,982 posts, read 6,693,790 times
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I think the title insurance industry is due for some reform, as it does not seem to be a competitive marketplace benefiting consumers. They say they spend a lot of money for research to prevent claims in the first place, but it is not like they provided me a property history report when I bought my last two homes, and databases are cheap these days, especially ones reliant on gov't records.

"In 2012, according to ALTA, the industry paid out about $908 million in claims, about 8.1% percent of the $11.2 billion taken in as premiums."
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Old 09-05-2015, 05:27 AM
 
4 posts, read 5,410 times
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In the case of Lennar Homes, they should be fairly easy to find, actually. You can bet that Lennar did some thorough research before purchasing your subdivision, and took out title insurance themselves. I would love to find one case where title insurance paid off on a new home in a new division by a national builder. Really.

Your risk is miniscule. The cost of insurance is outsized, as verybadgnome points out. Any other insurance company would be delighted to have a payout rate of 10 times the tiny amount that title insurers pay to policyholders. Of course, the insurers have to pay out in commissions far more than they get to keep (see below). Lastly, there are a number of exemptions and maximum payouts written into your contract so that policy may not turn out to be as valuable as everyone (including real estate agents) assumes it is.

That said, check your purchase agreement. Lennar probably is offering incentives, and among those may be a requirement that you use these funds to purchase an owner's policy. Especially if it's common for sellers to purchase the policy in your area. It's a bit of a shell game.

http://commonwealthmagazine.org/econ...tle-insurance/


Last edited by hodgieok; 09-05-2015 at 05:38 AM..
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Old 09-05-2015, 05:34 AM
 
4 posts, read 5,410 times
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Quote:
Originally Posted by IC_deLight View Post
Why do you think the lender seeks title insurance?
Lenders get title insurance so that they can aggregate mortgages and resell them as investment vehicles on the secondary mortgage market. Without title insurance, that would not be possible.
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Old 09-05-2015, 07:15 AM
 
206 posts, read 296,685 times
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Yes, title insurance is the only time in life you get to purchase insurance for something that might have happened in the past.

Homeowners insurance protects you after you purchase.

If there is a lien for the land/house/tax/etc before you purchase the house they can come after you because your the new owner; you are screwed and liable for it. With title insurance, the company writes the check and it all goes away without you having to deal with it.
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Old 09-05-2015, 08:21 AM
 
Location: Great State of Texas
86,052 posts, read 84,118,875 times
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I've only gotten an owner's policy when I was not the first owner of a property.
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Old 09-05-2015, 08:55 AM
 
3,308 posts, read 5,732,570 times
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Quote:
Originally Posted by HappyTexan View Post
I've only gotten an owner's policy when I was not the first owner of a property.
I'm assuming you're referring to a new home in a subdivision.

Last edited by lonestar2007; 09-05-2015 at 09:08 AM..
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