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True or False: Does Title Insurance Never Have to Pay?

April 6, 2011 Stephen Collins

True or False: Is Title Insurance one of the kinds of insurances that never has to pay?

The answer is False

The job of a title insurance company is to look at the property, deal with title problems, and assess the risk. They try to minimize that risk with a thorough title search, a search of public records, looking for anyone else who might have ownership rights or interest in the property.

I have a story for every question. I’ve been in the business long enough that I can give you an example for every situation, often more than one, but I’ll limit myself to one here.

There was a lady who wanted a trust created, but she was mad at her family and wanted to give her house to the guy who had been so nice and had taken such good care of her. When she died, he got the house, and sure enough, her kids challenged his ownership. They sued him for what they felt was their rightful inheritance.

Even though the guy had gotten the house free and clear, he did not have the money to defend himself in a court of law against their claim. Fortunately he had gotten a title insurance policy on the house, and that policy paid his court cost. Completely.

Yes the title insurance company did pay out on the policy. It happens more often than you think.

Stephen CollinsTrue or False: Does Title Insurance Never Have to Pay?
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New 2006 ALTA Forms

March 28, 2011 Stephen Collins

Seems a little out-of-date to call something “new” that’s five years old. It’s not that we’re that far behind, but as my attorney brother points out, this is the version of the forms the State has recently approved for use with title insurance products in Florida.

What am I talking about?

ALTA stands for American Land Title Association, which is the national trade association and voice of the abstract and title insurance industry.

Huh?

ALTA members—such as Land Title of America and other title companies—search, review and write title insurance policies to protect home buyers and mortgage lenders who invest in real estate.

Why are the new forms significant?

Real estate investors buying land need to know to ask for the 2006 ALTA forms. Older ALTA forms don’t provide the same protection and coverage the new forms do. Hey, we all need to be on the same page here.

There are some changes in the 2006 version I’d like to point out:

  1. They made the fine print larger. They don’t like that fast talking like at the end of a radio ad, and they don’t like fine print. The fine print’s larger so it’s easier for everyone to read.
  2. With Surveys, you don’t have standard exceptions; instead, you have to specify exceptions on the survey.
  3. Title Insurance is now transferable to heirs. In the past, I recommended always get title insurance when inheriting property from family members. Now you can inherit title insurance along with the real estate. Please note, this change does not include property inherited prior to the adoption of the 2006 ALTA forms.
  4. The “Florida Form 9” is now called “Form 9.” Form 9 is very explicit about many items, including Mineral Rights, Covenants & Restrictions, and Encroachments.

For forms available online, or for more information, go to www.alta.org.

Stephen CollinsNew 2006 ALTA Forms
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Money Pit

March 24, 2011 Stephen Collins

When you’re buying a home, what you don’t know can cost you.

There are great deals on the market right now, especially through REO’s (Real Estate Owned), also known as Bank Owned Properties. Bank Owned Properties are pieces of real estate that has been repossessed by the lender or bank. In many cases, you can pay a low purchase price for an amazing potential on an REO. The drawback is that the bank doesn’t know what’s wrong with the property. The bank doesn’t live there, so it doesn’t know if the place needs a roof replaced or if it just needs a new doormat. The bank can’t give you guarantees.

You can avoid buying a money pit with a home inspection. Get a home inspection before buying a home, especially an REO, that way you have an idea of what repairs will be needed, and you can consider those costs in your budget.

You can avoid owning a money pit with an owner’s title insurance policy. Purchase title insurance at the real estate closing, that way you can focus on fixing up your home without financial concern about somebody else trying to claim ownership after you’ve paid for it and spent money on repairs.

Title insurance gives you peace of mind about your legal rights to real property. It’s a one-time fee at closing that protects you for as long as you or your heirs have an interest in the property. It pays valid claims and covers the cost of a legal defense of your ownership.

As a buyer, you should be aware of how good a deal you’re getting by having a home inspection done ahead of time, then as an owner, protect that deal with an owner’s title insurance policy.

Stephen CollinsMoney Pit
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Spaghetti! Spaghetti! Spaghetti!

March 14, 2011 Stephen Collins

I’m glad you’re paying attention because title insurance is often overlooked. In the half-inch stack of disclosures and mortgage documents you sign at your real estate closing, you might not realize the threat you have of losing your home or land—it’s odorless, soundless, and you can’t see it with a title search—you don’t know it’s there until it’s on top of you! And then you’ve got to pay to defend yourself against it!

I’m passionate about title insurance, maybe you’ve noticed. It’s not just spaghetti on the wall. Title issues are a real estate subject with broad reaching ripples. What affects the real estate market affects the overall economy? I don’t care if you’re buying a single-wide mobile home or the Taj Mahal, title insurance helps protect everyone.

Everyone can see flood damage, everyone knows what a fire can do to a house, but the harmful effects of losing your home or land because of a legal challenge to your ownership aren’t real obvious to outsiders.

There’s a lot to know in a real estate transaction, and there’s a lot I want you to understand at the closing table. If I can educate you on the importance of title insurance beforehand, then we’re ahead of the game. The closing table is not an ideal place to learn all the subtleties of risk to your ownership. You’ve got the title search in your hand showing clear title—it’s hard to see the need for title insurance when the risk is hidden.

Some people learn the hard way, and that’s very bad. If you’re aware of the risk, what you’re up against, and the advantages of title insurance, then you can prevent a financial loss that could swallow up your property.

No, the law does not require title insurance. But the law does allow its citizens the right to own property and the right to protect it. If you buy a security system for your home, why not title insurance? Both protect your property.

I live here. Your loss is my loss. We’ve had enough devaluation in the real estate market. Support sure ground with title insurance.

Stephen CollinsSpaghetti! Spaghetti! Spaghetti!
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