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I'm buying a credit union REO in Minnesota and paying cash - in the past I've had good experiences with title opinions instead of paying for a much more expensive title insurance policy.
This time I'm a little concerned about undiscovered liens or clouds on the title of a foreclosure.
Does anyone have reccomendations about title opinions vs insurance?
I think the answer will be different from state to state. If only going with a title opinion I'd get one from an attorney. You can always quiet the title after closing which can help. But usually the seller pays title insurance here in FL....so doesnt come up too often.
My contract specifies the buyer pays title insurance premium - I'm wondering what other VALID claims or liens could exist that do not appear on the title report.
In most cases there is a window of time between the title search and the closing. While the window of time is small it's large enough for someone to record a valid lean on the property. It has happened to one of my clients and to one of the title companies/attorneys I use. In both cases the title insurance came in handy. In both cases the record search was repeated just prior to closing.
I would always advise my customers/clients to obtain title insurance.
HIF - you mentioned having to use your title policy and I'm curious about some specifics - if you care to share. In 25 years I had one $500 mechanics lien - the title company found it was a mistake and paid nothing.
FlBob - my real estate attorney examines a title report the day of closing.
HIF - you mentioned having to use your title policy and I'm curious about some specifics - if you care to share. In 25 years I had one $500 mechanics lien - the title company found it was a mistake and paid nothing.
FlBob - my real estate attorney examines a title report the day of closing.
He may examine it the day of closing, but you have to consider when it was COMPILED, and what liens & encumberences may have been FILED but not yet RECORDED when it was compiled.
Good points Bill. I meant to say the attorney pulls an updated title report the day of closing. Probably the date and time of recording is more important then time of filing and there could be a lag time from filing to recording of the deed.
Couple things to consider - first I would not get a title opinion in every state, certainly not Florida or California.
Most attorneys carry insurance similar to E & O insurance used by realtors. A GOOD attorney would also work to clear up a title problem, if it was something they missed.
As FLBob and Bill Keegan point out, there can be unrecorded yet perfectly valid liens. Mechanic's and materialman's liens are the most common of that variety. Many do not have to be recorded until several months have passed between last service performed or material delivered. All title insurers I've ever worked with extract an "estoppel affidavit" from the seller which takes the insurer off the hook for valid yet unrecorded liens. If the seller discloses work within the time frame a lien can attach without filing, the closing will [or should] be stopped and lien waivers obtained. Unfortunately, I've seen too many estoppel affidavits signed simply as a matter of course without due inquiry and explanation. So, if the seller doesn't disclose potential liens and simply signs the affidavit, insurance offers no additional protection for that little surprise. Your recourse is against the seller, period. Every title opinion I've ever issued [or read from somebody else] also contains a disclaimer that unrecorded, yet valid liens may be in existence and the potential purchaser or encumbrancer is put on notice to beware of the same. So it's 6 of 1 and 1/2 a dozen of the other on this subject relative to lawyers or title companies.
An attorney's opinion is created in exactly the same manner as a title insurance policy - the chain of title is examined, each entry is reviewed and reconciled, and an opinion is reached on who is the owner and what, if any, encumbrances are of record. Some clouds on title are of negligible risk and an insurer may write a policy over them...an attorney will note them and advise similarly on risk and which clouds or encumbrances must be resolved before closing. So the process and is not particularly different - and both the title company and the attorney are working for you, the party purchasing the coverage or the opinion.
So, it boils down to who is going to back up their opinion if, unfortunately, a mistake is made? Who will more zealously defend title? I submit that in a small rural area, probably an attorney. In a city or a highly populated area, probably the title company. Why? In rural America your lawyer is your friend and neighbor and will feel absolutely terrible about the problem and will want to take care of it. To a national title insurer, you're just a policy number no matter where you are. In the big town/highly populated area, lawyers become a fungible good and there are lots of other clients. So, it doesn't matter - you're just a number to either one of them!
Just my thoughts...for what they are worth on a public board. Which, I suppose, is about $0.00!
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