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I am about to purchase a property that currently sits in a trust with 5 different beneficiaries. They have all agreed to sell it to me. Is title insurance even necessary in these situations? I bought a foreclosed home without title insurance and there have been no problems and was thinking that properties in estate trusts should be similarly without problems...
I am about to purchase a property that currently sits in a trust with 5 different beneficiaries. They have all agreed to sell it to me. Is title insurance even necessary in these situations? I bought a foreclosed home without title insurance and there have been no problems and was thinking that properties in estate trusts should be similarly without problems...
Here's info from "realtor.com" regarding title insurance:
Purpose of Title Insurance
Protect the claim to your property with title insurance
By Wendy Dickstein
Title insurance protects the legal claim of the title owner to the property you own. When you buy a home, the seller transfers the deed over to you. You are now the title owner of the property and this is registered in the land registration of the state. If the lawyer makes any errors in transferring ownership or the title was fraudulent, your title insurance will reimburse you for any financial loss you incur as a result. This ensures that you will be able to mortgage, lease or sell your property in the future.
Title insurance protects the title owner against any defects that prevent him from clearly owning the property. It also protects against any liens the former owner may have had against the real property in the form of unpaid mortgages, property taxes, and other unpaid debts, as well as title fraud, encroachment on the neighbor's property, and possible errors in public records.
Two kinds of title insurance
There are title insurance policies for property owners and for lenders. Owners' policies protect property owners from different types of losses related to the title to the property and specify a maximum amount of coverage. Lenders' policies protect lenders from monetary loss up to the amount of the mortgage in case that mortgage turns out to be invalid. There are also different kinds of title insurance for home buying of residential property and for commercial property.
What title insurance does not cover
Title insurance policies usually have certain exclusions to the coverage. Read the policy carefully to know what these are. They may include such things as: defects in the title which were made known to you before you bought the property; zoning bylaw violations you may be responsible for as a result of renovations or additions you made to the property after you bought it; and environmental hazards and other matters that may not be listed in public records or may result from a new inspection of the property.
Other facts about title insurance
Title insurance is paid through a premium which is based on the value of the real property. It does not cover losses that are not related to issues involving title to the property. Other kinds of loss and damage to the property need to be covered by other kinds of insurance policies. The coverage of the title insurance policy will remain in effect as long as the owner remains the title owner of the property. It can be passed on to heirs in a will as well.
After having asked RE attorneys a bunch of questions with regard to what could go wrong, IMHO it's well worth the $$
What if someone later comes along and tries to dispute the will that setup this trust? Then where would you be? Personally I would do title insurance for the piece of mind that it buys for a fairly low price (although yes, I don't know of anyone that has ever actually gone back with a claim, but then that is the point of insurance, to cover you for things that rarely happen).
I worked as a title searcher and examiner for a number of years. Knowing the kinds of issues there are, I wouldn't ever consider not purchasing a title policy.
A trust -- with FIVE different beneficiaries. Oh, HELL yes, I'd be getting title insurance!! Way too many "what if's" in that case. ANY time there's an estate settlement, with wills, beneficiaries, etc., I'd make very sure there was title insurance.
What if someone later comes along and tries to dispute the will that setup this trust? Then where would you be? Personally I would do title insurance for the piece of mind that it buys for a fairly low price (although yes, I don't know of anyone that has ever actually gone back with a claim, but then that is the point of insurance, to cover you for things that rarely happen).
That's the point, how much risk am I willing to leverage... If its very low risk, I wouldn't bother but if the risk is higher than I would... I have minimum on my car insurance because I don't believe I would ever need it... I pay a little bit more on my health insurance because I know that I will need it eventually... title insurance in this situation, makes me think it really isn't needed at all.. too low of a risk...
My realtor told me title insurance is a MUST in her book. Even if the risk is low (which it probably is) it is not that much money to spend for extra peace of mind. I would not take the risk no matter how low I thought it was.
I would never buy a property nor advise anyone to buy a property without title insurance. Its just a one time fee and in the grand scheme of things its not that much considering what its protecting.
I am about to purchase a property that currently sits in a trust with 5 different beneficiaries. They have all agreed to sell it to me. Is title insurance even necessary in these situations?
Complicated situations are the very transactions which should have title insurance. But the complications need not be just obvious ones--such as a number of people involved. Many complications could be hidden in the chain of title. If you had an attorney review the chain of title, there might be a lessor need for title insurance. But it sounds like you're just trying to save money, so I suspect that you don't even have an attorney.
In Michigan, title insurance is customarily paid for by the Seller as way of assuring that the Seller has good and marketable title to convey. I'm not sure what is customary in your state but, regardless, who pays for a title insurance policy can be a negotiable item. See if the Seller will pay for a title insurance policy...or at least split the cost. I would never accept a Deed merely on someone's word that the title is free and clear.
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