See why so many people try to cut this expense out of their closing on a house. It’s one of those areas that is optional. Tell us, when you purchased a house, did you buy title insurance? If not, what’s your reasoning? If you then again sold that house, how did it go? We’re going to tackle this topic, and we’re going to talk about some real-life case studies of not buying title insurance and how it affected that individual in selling.
The concept of title insurance might seem like an added expense, but it serves a critical purpose in protecting your property rights. In Georgia, attorneys conduct thorough title searches to identify any liens or encumbrances on your property. These issues are then addressed by resolving outstanding payments or other issues that may affect your ownership rights.
Let me share what Forbes has to say about title insurance. (See Article here) It highlights how a title claim can unexpectedly arise, even after years of owning a property without any issues. The article explains that hidden ownership rights or claims against the property can emerge, unbeknownst to both the buyer and the current owner. This is a risk that many real estate transactions face, especially those involving home loans. Lenders typically mandate thorough checks for liens, easements, and encumbrances to protect their investment.
Liens can be placed on a property by a contractor, a tax authority, a lender who hasn’t been paid. You don’t want to get stuck with a lien on the property being due when you had nothing to do with it. And this is why this title search is done.
Easements are like permissions for other people to use parts of your property. For instance, if there are utility lines running through your backyard, the utility company might have an easement allowing them to access those lines. This means they can come onto your property to fix or maintain them. But here’s the thing: easements can limit what you can do with your property. For example, if you wanted to build a barn where the utility company needs access, you can’t do that because it would block their way. So even though you own the land, you have to keep certain areas clear for others to use. It’s all about how you can use your property, and easements play a big role in that.
Encumbrances are things that limit your rights to use your property fully. They include liens, which are claims on your property for unpaid debts, and easements, which give others the right to use part of your property. But there’s more to it than that. Encumbrances also cover zoning laws, which dictate how you can use your land, and rules set by homeowners associations (HOAs) that can restrict what you do with your property.
When you buy a property, you typically get two types of insurance policies. If you’re getting a mortgage, the lender will require you to get a policy to protect their investment. But even if you’re paying cash, you might want to consider getting an owner’s policy. It’s optional, but it can provide valuable protection.
Many people try to save money by skipping title insurance when buying property, hoping to lower their closing costs. Here’s a real-life example of why this might not be a good idea.
There was a property in Bulloch County, Georgia, a couple of acres large, once intended for a subdivision that never materialized. Instead, the lots were sold together, including a mobile home converted into a permanent house on 2 acres. The owners decided to sell and approached a real estate agent to list the property.
However, they hadn’t purchased title insurance when they bought it. As it turned out, one or two of the lots had unresolved liens or ownership claims going back nearly 100 years. Resolving these would have required obtaining quitclaim deeds from potentially numerous heirs, making it practically impossible to clear the title.
Fortunately, the structure didn’t sit on these problematic lots, but on the rest of the property. So, they were able to sell the property minus the affected portion, with a mortgage company assessing and financing the sale, with a lien placed on the problematic portion. The transaction went through, but it illustrates the risks of skipping title insurance.
The lesson learned here is that skipping title insurance can lead to significant issues. In this case, the client initially thought the attorney who handled the transaction should be held responsible for the oversight. However, when they approached the attorney, they admitted they weren’t proficient in this area and had ceased handling such matters due to their limitations. Moreover, the statutes of limitations had expired, preventing any legal action against them. This left us with no choice but to find an alternative solution. If the structure had been directly affected by the problematic lots, there would have been no easy fix, possibly causing complications with lenders.
So, should you buy title insurance?
From my perspective, the answer is a resounding yes. Title insurance is a crucial safeguard that can protect you from potential issues down the line. While it does come with a cost ranging from $1,400 to $3,000, depending on the property’s purchase price, it’s a worthwhile investment. Different title insurance companies offer varying rates, but the charges are typically based on state-regulated rates. In our area, we primarily work with companies like Old Republic and American.
If you’ve bought a property without title insurance, we’d like to hear about your experience. While some people opt out of title insurance and everything goes smoothly, others may encounter issues down the line. It’s crucial to understand that without title insurance, you could face difficulties, especially when selling the property. Even though some transactions may seem fine without it, there’s always a risk involved. So, if you’re considering skipping title insurance, think twice to avoid potential complications in the future!
If you have any questions or concerns or if you’d like a free consultation to discuss your specific situation, feel free to reach out to us. You can CLICK HERE or call us at (678) 389-3887. We’re here to help you navigate through the complexities of real estate transactions and ensure that you make informed decisions.
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