After many years of buying & selling land I’ve been through a zillion transactions it seems. NOTHING fires me up more than the topic of Title Insurance.
Title insurance has a long history in this country and has helped many people over the years. Most of them were helped decades ago because times change , record keeping is better than ever and some things in life simply are outdated. With no hesitation or apologies I put title insurance at the top of the “outdated” list. In my opinion it’s nothing more than a ripoff and very few if any need it. There are 2 types of title policies so lets look at both quickly.
1) Lenders Policy : This is when you buy your house and the bank requires YOU to pay for a title policy that covers the BANK! This policy lasts for the duration of the loan and pretty much covers nothing. When you get REAL bored take a look at the policy and try to concoct a scenario in your mind that this “policy” will cover. The so-called policy is a document of exceptions and exemptions – stuff it doesn’t cover.
2) Owners policy : This policy is one you pay for (again) but it’s actually for you. Imagine that , paying for something that’s meant to benefit you. Your friendly lender will give you the opportunity to buy a owners policy at the same time you’re paying for a policy that covers them. The policy itself covers ( cough ) in the same manner the lenders policy does but it is yours to have and hold for however long you own the property.
So what’s my beef? Simple , I don’t believe title insurance covers anything these days. What I look at is this : who OWNS the title company and where does my premium go? Chances are the “title insurance” company is owned by your lender or the lawyer they have representing them. If this stuff is so important for me the buyer then why are the referrers in this transaction walking away with up to 80% of the money you just paid for this policy? Because it’s an accepted ripoff that’s why. When you close on real property and check out your closing statement you’re going to see you are paying hundreds if not thousands in title insurance fees. That adds up in a hurry especially when you’re buying a piece of land to go build a cabin and fool around on the weekends.
So what makes title insurance obsolete today(in my opinion)? When you buy property a title search should be done. I do it every single time I buy and always will. It’s a relatively simple process that is set up through an attorney and is more or less standard operating procedure. So a search is done , the title is free and clear and the property has a Warranty Deed. THAT is all you need to know. Anyone selling you title insurance will say ” well , the policy is important in case the abstract company missed something”. They didn’t miss anything and a Warranty Deed settles everything. As I’ve written about previously, a Warranty Deed is the most important bit of info you need to know about the land you want to buy. What I’ve seen in this business is a lawyer representing a lender at a transaction , selling title insurance at close and the bank & lawyer splitting the money you just paid for this piece of garbage. They walk away with your money while you walk away with a piece of paper explaining what you DIDN”T just pay for.
Don’t let this process be anymore complicated or expensive than it already is. We have lenders up here who loan money to my customers all the time. They DON’T require title insurance. I buy land all the time and I never buy it. When a person buys land from me I can tell you the title search is done and a Warranty Deed is issued at close. I couldn’t count how many times I’ve spoken with a buyers attorney who’s out of state , out of town etc and all they want to know is “does this land have a Warranty Deed?” My answer is yes and they say ” great, that’s all I needed to know”. That’s how it usually goes and it should. When you run into anyone who’s pushing you to buy title insurance you better start asking questions. The 1st one should be this : explain to me in detail a situation that could arise and how this policy will benefit ME? Be ready for silence.
Now I’ve just offended a few bankers & lawyers , too bad. At some point this scam is going to be handled in a legal manner which will expose everything title insurance in this country is all about. If any of you know John Stossel tell him about this and let him have a field day ripping this business to shreds.