Title Insurance—What Is It? Do I Need To Pay For It?

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By: Christel Silver Special to the Boca and Delray newspapers
According to Wikipedia, “Title insurance is a form of indemnity insurance, which insures against financial loss from defects in title to real property and from the invalidity or un-enforceability of mortgage loans.”
So, do you need title insurance, which is a onetime cost at the time of closing and based on the value of the property? The answer is: Yes! And it is best described why you need it by sharing my own experience.
My investor client closed on a property in Maryland on a Tuesday after having walk-through at the property. The property needed work and my client went back to the property on Thursday with his construction company to start working. When they arrived, the house was wrapped like an Easter Egg with crime scene yellow tape and a sign: ”Do not enter by court order – do not trespass.” My client called me and we found out that the court had attached the house to a lawsuit for punitive damages. Apparently the dog of the former owner had bitten a person, who sued him in court for damages. The judge attached the house to the lawsuit for punitive damages on Wednesday.
The importance of having title insurance was imminent. My client hired an attorney who notified the court of the closing, which luckily happened prior of the judge’s order. The damages for my client were small, mainly attorney fees – but paid by his title insurance.
Other examples for claims could be:
·A person in bankruptcy signs the deed to convey the property without authority to do so;
·A family member is forging the signature and conveys the property to a third party;
·A deed is incorrectly recorded with wrong legal description;
·A mechanics lien was placed against the property, which was not found at time of title search.
If you finance the purchase of the property with a mortgage from a lender or refinance your loan, you have to obtain a title insurance to protect the lender. You do not have a choice. In some areas (like Palm Beach County) it is customary that the seller pays for the lender’s title insurance premium.
But to insure yourself – the buyer, this insurance is optional. Owner’s title insurance is complex and you should read the policy to understand any exclusions. Ask the title agent to explain the coverage to you.
How much is the title insurance? In the state of Florida the insurance and endorsement rates are promulgated by the Florida Insurance Commissioner. To give you an example: For a sale of property valued with $200,000, the insurance premium is $1,075 (endorsement fees may be added.)
Since you are required to pay for the lenders policy, you can ask for a simultaneous issue rate, which will make your owner’s policy relatively inexpensive. In the above example the additional fee would be $25. Also if the owner has a policy, which was issued less than three years prior, you can request a re-issue rate – which is a reduced premium of up to 40 percent. If you are paying cash, the owner’s policy would be the full amount of $1,075.  The insurance covers you as long as you (or your heirs) own the property.
About Christel Silver
Christel Silver is a full time Broker/Owner of Silver International Realty servicing the East Coast of South Florida. In 1985 she was licensed in Maryland and Washington DC as a Realtor and later as a Certified Residential Appraiser and Associate Broker and has been in Florida since 2001. The National Association of Realtor’s (NAR) President appointed her (2010-2014) as the President’s Liaison to Germany, where she grew up and worked at the Justice Department for 17 years prior to coming to this country. The Germany Real Estate Organization (IVD) has an agreement with the NAR and she is an International member of this organization. Christel is a Certified International Property Specialist (CIPS), and a certified speaker teaching CIPS classes. Having been President for the Florida Certified Residential Specialist (CRS) Chapter, she is now serving as a Regional Vice President helping Chapters to grow, currently for Virginia, Central Virginia and Maryland. Fifty percent of her business is in the International arena. For more information visit www.silverhouses.com.