Sitting across the closing table from purchasers, I get to hear first hand their reasons, excuses and rationalizations as to why some choose against purchasing Owner’s Title Insurance. Even though it is a small percentage of purchasers who choose not to purchase Owner’s Title Insurance, I believe there is something to be learned from their thinking. Keep in mind that an Owner’s Title Insurance premium is a one-time premium that protects the owner as long as they own the property and even after they sell the property. Ronald S. Critzer, President of Court Square Title, will respond to the 5 most frequently heard reasons given by the non-Owner’s Title Insurance buyers. Ron is licensed in the Commonwealth of Virginia as a title insurance agent.
Reason #1: My uncle/neighbor/lender/Realtor told me I don’t need it.
Ron’s Response: Super! You can sue your uncle/neighbor/lender/Realtor if there is ever a title problem. As I was writing this response, I decided to check with the American Land Title Association to get a dollar figure for the claims paid annually. For 2012, that amount was $908,000,000. Claims do happen.
Reason #2: We’re not putting any money down (100% financing) so I don’t have anything to lose and I don’t need it.
Ron’s Response: Two things to consider here:
1) With each monthly payment you make, and with every increase in value, you are building equity. Without Owner’s Title Insurance, that equity is unprotected.
2) In this example, your lender has a title insurance policy for the amount of the loan, which is also they price you’re paying for your house. Where’s the need for an Owner’s Title Insurance Policy (OTIP)? The coverages provided in the OTIP are much broader than in the Lender’s policy. In fact, the OTIP would pay attorney’s fees if you had to protect yourself against a claim.
Reason #3: This property has been in my family for years and I know the title is clear.
Ron’s Response: Some of the greatest messes I’ve seen have involved property that has been in the same family for generations. Often, parents and grandparents verbally let the family know who they want to get the old “homeplace”, but never put their wishes in writing. Then, upon their death, the laws of the Commonwealth of Virginia take over, and grandpa’s wishes may not matter. Consider this: Do you know that your grandfather didn’t give the neighbors an easement to use the well? Or that your father’s mortgage was fully released from the land records? How about your cousin everyone thought was dead?
Reason #4: It’s a brand new house so how could anything be wrong?
Ron’s Response: Yes, but the land isn’t brand new, and that’s what the policy insures – ownership of the land. It’s been there forever and probably at some point was someone’s “homeplace”. Remember response to #3 above.
Reason #5: It’s in a subdivision (or townhouse development or condominium) so the title has been searched hundreds of times. If there were a problem, it would have been found by now.
Ron’s Response: Sure, IF it could have been found. The land records are only as good as what’s submitted to the clerk, and only as good as the clerk who indexes the documents submitted. If the clerk’s office files a “McDonald” document under “MacDonald” the title examiner may not find it. What about hyphenated names? We can only hope that the title examiner and the clerk doing the indexing are on the same page.
Finally, forgeries and impersonations can’t be detected from the land records. I, personally, would buy Owner’s Title Insurance even if it only insured against forgery and impersonation. Remember identity theft?
If you ever have questions about title insurance, Owner’s or Lender’s, give us a call at Court Square Title. We are always happy to give you a quote or answer any specific title insurance questions you have.
– Mary Ann Trice, Court Square Title of Charlottesville
Please Note: Articles written by CST employees are the opinions of licensed title insurance agents and are based on experience as such. They are not to be taken as legal advice.