Need title insurance on inherited property? (agent, mortgage, mortgage, properties)
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If you inherit a paid off property (California) and county records show you as full owner and deed type is 'Grant Deed', is it necessary or wise to carry title insurance?
I guess another way to ask the question is this, if you own a home outright is it recommended to buy Title insurance?
Is it even possible to obtain? I am reading that it is only available at closing.
Am I totally misunderstanding the meaning of what title insurance is? I understand it to be a 'backup' to county records of ownership basically.
Thanks in advance.
Last edited by Texas Minded; 12-16-2018 at 09:54 AM..
I am not an estate attorney, nor do I have deep knowledge of transferring property through the estate process. However, in theory the entity that issued this Deed to you performed a title search to ensure no other parties had a claim involving the property. "Someone" had to do a title search, which would have revealed any valid claims against the property.
Title insurance covers the beneficiary - you - if something was missed in that process. The title insurance policy would pay to clear the title for you. It doesn't cover you if in the future someone makes a claim against you.
You can get title insurance now if you like; the title agent will perform (another?) title search (which will cost you money) and then issue the policy (more money)
My understanding is that title insurance says that when you buy no one else has any outstanding interest in the property or has any liens filed against it, and if any are found afterwards the title company pays to clear them. So it's really only good up to the day you buy, but it's good forever (up to the day you bought) if by any chance someone filed a lien a week before you bought and it didn't show up. I doubt you would need it. Perhaps a title company can sell you a title search. Also usually a bank requires it when you take a mortgage so they don't get stuck with owning a bad title to the house.
Also say someone puts in a lien late, I would think it's their loss and they have to find a way to get their money some other way. Also liens are rare, in the sense that it has to be a debt owed in association with a repair or money owed from that property itself. Such as a student loan or credit card debt would never result in a lien. I'm not a pro but that's my understanding. In the old days of paper trails it was more work but now in the days of computers it's much easier and faster to find the info. Plus a lien would have to be recorded with your county government so I think it would be easy to find yourself.
Title insurance is typically purchased when one is buying property. It should identify any impediments to a fully clear title (liens, easements, etc.), and if any of those impediments need to be cleared before one takes ownership. It may also clarify legal boundaries of the proeprty. Typically, in that case, the seller must provide the buyer with a clear title (such as with a warranty deed) with no liens, as easements are a permanent impairment. Title insurance is a point in time insurance and is not 'carried.'
When you inherit property, you take title subject to any then existing impairments (such as liens). I doubt that any title insurer would issue a policy since you already have title (and, in some jurisdictions, deemed to know of all impairments). What you might want is title search that will identify any impairments to a clear title, like a lien, but also any existing easements that might affect how you use the property and others may use your property. A title company may do such a search or a real estate attorney. You could probably do one yourself, depending how the local records are organized and whether or not you have to do the search in person or online.
If you plan to sell the property, you will have to provide the buyer with an owner's title policy prior to closing.
If you plan to sell the property, you will have to provide the buyer with an owner's title policy prior to closing.
That's normally the case, but title insurance is not a legal requirement--it's a contractual one. Lots of properties get sold without the Seller providing title insurance.
It is theoretically possible that there could be a problem with the title that was not found when the person you inherited the property from purchased the property, but a title search was surely done when they purchased it. It is also theoretically possible that there could be liens against the property that you don't know about, but if that's so, why hasn't a lien holder stepped forward?
There's little chance that you will decide to disinherit yourself if you were to find the title chain were messed up. Even the cost of addressing such an issue would be less than the value of the property, surely. (Normally the idea is that should a tangled problem arise in a purchase, the title insurance protects the buyer against the cost of unsnarling it.)
When you go to sell the property there will have to be title insurance anyway, to protect your buyer against the chance of a problem with the title.
So basically if you can find someone to issue title insurance for a property that you already own, you are spending a vast amount of time to guard against something whose probability seems vanishingly small.
Not the insurance itself really (though of modest cost)...
it's about the deep title search that backs up the insurance.
Agreed. I recommend title insurance. Ignore the rest of the bad advice. Most of it is from people that don't know enough about it that they should have offered an opinion.
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