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Posted by on June 24, 2008, 4:18 pm
I am buying a house for $615 K, with a mortgage of $415 K, in
Massachusetts. On the HUD settlement statement, the title insurance is
listed as costing $2635, with $175 being for the lender's policy and
$2460 being for the owner's policy. Of the premium, it says the law
firm retains $2108 of the premium.
I am thinking of skipping the policy and saving $2460. A title search
must already have been done to satisfy the lender, and Wikipedia
http://en.wikipedia.org/wiki/Title_insurance#Industry_profitability
says that only 4.3% of title insurance premiums are paid as claims.
Why should my policy cost more than 10 times more than that of the
lender's?
I am confident that sellers actually own the house. It's true I will
feel like an idiot if I forgo the policy and a claim arises against
the house, but with the $2460, I could I could increase the limits on
my car insurance, or make several payments on a term life insurance
policy. These types of insurance have far higher payout rates.
It's not as if the title insurer is going to do any further work
researching the title after the closing because I buy the policy. At
this point I am only buying protection, not due diligence, and the
cost seems wildly inflated.
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Posted by John A. Weeks III on June 24, 2008, 6:49 pm
In article
beliavsky@aol.com wrote:
> I am buying a house for $615 K, with a mortgage of $415 K, in
> Massachusetts. On the HUD settlement statement, the title insurance is
> listed as costing $2635, with $175 being for the lender's policy and
> $2460 being for the owner's policy. Of the premium, it says the law
> firm retains $2108 of the premium.
>
> I am thinking of skipping the policy and saving $2460. A title search
> must already have been done to satisfy the lender, and Wikipedia
> http://en.wikipedia.org/wiki/Title_insurance#Industry_profitability
> says that only 4.3% of title insurance premiums are paid as claims.
> Why should my policy cost more than 10 times more than that of the
> lender's?
Think about what this is saying. It says that 5% of the time, the
title is messed up on a house such that the insurance company has
to pay out to fix the problem. Are you willing to take a 5% risk
that your $600K investment becomes worthless because it is learned
that it is sitting 4 feet left of your property line?
You would be very risk tollerant if you pass up on title insurance.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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Posted by Sgt.Sausage on June 25, 2008, 7:32 pm
> In article
> beliavsky@aol.com wrote:
>
>> I am thinking of skipping the policy and saving $2460. A title search
>> must already have been done to satisfy the lender, and Wikipedia
>> http://en.wikipedia.org/wiki/Title_insurance#Industry_profitability
>> says that only 4.3% of title insurance premiums are paid as claims.
>> Why should my policy cost more than 10 times more than that of the
>> lender's?
>
> Think about what this is saying. It says that 5% of the time, the
> title is messed up on a house such that the insurance company has
> to pay out to fix the problem. Are you willing to take a 5% risk
> that your $600K investment becomes worthless because it is learned
> that it is sitting 4 feet left of your property line?
>
> You would be very risk tollerant if you pass up on title insurance.
I just spent 4 months cleaning up a title -- not on a home/personal
residence, but on an office building we *thought* we owned for the
last nine years. According to the official paperwork, we didn't own
it.
Title search *was* already done to satisfy the lender.
Title company screwed up.
It took 4 months to clean up, and we lost a locked-in
deal to sell it (it eventually sold after we cleaned
up the mess).
The good news: We had an owner's policy. Had we not
been able to obtain clear title, we would have been
made whole by the insurance carrier.
***
5% of the time seems a small chance -- but it *does*
happen and title SNAFUs are both time consuming and
expensive to clean up.
Do yourself a favor: Buy the policy.
.
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Posted by Elizabeth Richardson on June 24, 2008, 6:50 pm
>I am buying a house for $615 K, with a mortgage of $415 K, in
> Massachusetts. On the HUD settlement statement, the title insurance is
> listed as costing $2635, with $175 being for the lender's policy and
> $2460 being for the owner's policy. Of the premium, it says the law
> firm retains $2108 of the premium.
>
> I am thinking of skipping the policy and saving $2460. A title search
> must already have been done to satisfy the lender, and Wikipedia
>
The lender's policy insures only that the loan is in the first position. The
insurance isn't just that you might not have title to the property. The
owner's policy insures that you will have no loss due to unpaid taxes, or an
undisclosed encroachment, or an undisclosed right of way, or . . . The
possibility of loss is greater in those cases than that of the lender's
policy. I can't speak to whether your purchase of the policy is a good
financial decision, especially when I know nothing of the title company nor
whether the title plant is well-maintained.
Elizabeth
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Posted by Tad Borek on June 24, 2008, 7:17 pm
Elizabeth Richardson wrote:
> The > owner's policy insures that you will have no loss due to unpaid taxes
Here's a scenario I thought was interesting, a prior estate tax bill
that attached to the property, but which didn't see daylight until after
the houses were sold. The holding in the case is on another issue, but
I'm sure these owners were glad they bought title insurance - see First
American v. USA:
http://www.ninthcircuitopinions.com/2008/03/
-Tad
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