Settlement Question (Sarasota: real estate, insurance, loan)

[isdsms]

We are buying new construction from an established builder in an established development and financing part of the cost. The lending party requires "Lenders Title Insurance". "Owners Title Insurance" is an option for the home buyer. I am leaning toward not purchasing this as the provenance of the land and any liens thereof should be well established and revealed at this point. Looking for thoughts on this.

[Old Gal]

Personally, I would get it.

[Sunshine Rules]

This is from one of the periodic, informational emails provided to agents by a local law firm, Berlin Patten, regarding title insurance. I saved it to share with customers who are asking the same sort of question you are asking:


There are two types of title insurance: Lenders title insurance, which is also referred to as a Loan Policy, and Owner's title insurance, referred to as an Owner's Policy. Most lenders require a Loan Policy when they issue you a loan. The Loan policy coverage is usually based on the dollar amount of your loan, but it some lending situations, the loan policy coverage could be greater than the amount of your loan. It protects the lender's interests in the property should a problem with the title arise.

Owner's title insurance coverage usually equals the amount of the real estate purchase price. It is purchased for a one-time fee at closing and lasts as long as you or your heirs have an interest in the property. Owner's title insurance will also protect you even after you've conveyed your interest in the property in the instance a lawsuit arises under the warranty deed. Only Owner's title insurance fully protects the Buyer should a problem arise with the title that was not uncovered during the title search. Owner's title insurance also pays for any legal fees involved in defending a claim to your title.

In order to issue title insurance, the title underwriter must search public land records for matters affecting that title. Many title underwriters search the "chain" of title back 50 years. After a title search is conducted a title commitment is produced. About a quarter of the time title searches discover a title defect that will need to be fixed before the closing occurs and title insurance can be issued. Once these items are corrected the title agent is able to properly issue the title policy to the Buyer. In the event these issues cannot be corrected in a timely fashion, the title agent should work with both the Buyer and Seller to assist them in correcting the matters. Many times title related defects will require the Seller to engage an attorney to fix the problem.

Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after closing. Things such as mistakes in the public record, previously undisclosed heirs claiming to own the property, or forged deeds could cloud the title. Owner's title insurance offers financial protection against these hidden hazards by negotiating with third-parties, and paying claims and the legal fees involved in defending the title.


My 2 cents..... buy the owner's title insurance. The cost is reasonable, especially compared to what it can cost to cure a title defect found later on.

[motordavid]

isdsms,
Sorry I didn't reply more quickly to our recent batch of emails...
+1 on the owner's Title Insurance. We got it, even though we were cash. Cheap one time cost for serious peace of mind.
GL, mD & V

[Restrain]

Here is a true life example. Buyer thought he was purchasing several lots. Through an error, part was not deeded and his property line ended up running through the middle of the pool. He had the 'Owner's' policy, title agency was on the hook for figuring out how to fix this, cost them a bunch of money hiring a large legal firm to clean it out.

[Sunshine Rules]

There's a subdivision in Sarasota built in the late 90's where the builder's survey company messed up on one entire block of lots, so builder ended up putting several of the homes at least 6 - 12 inches into the easements. The mistakes weren't "found" until some of the homeowners decided to sell and move on. I had a buyer back out of purchasing one of those mistakes because it was going to take at least 2 months or more to get all of the variances they needed to fix the title issues, and she needed to close sooner rather than later.

That's a perfect example of why a new home buyer should get the owner's title policy.