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Overcoming Owner’s Policy Objections
When the TILA-RESPA Integrated Disclosure (TRID) requirements went into effect, lenders began issuing a new Closing Disclosure to homebuyers. This new form lists the Owner’s Policy of title insurance as an “optional” purchase. While an owner’s title insurance policy has never been required, this “optional” language may spur questions regarding the value of title insurance. Here are some common objections to an owner’s policy.
“I’m already paying for title insurance.”
This charge is for a lender’s policy of title insurance, which protects your lender, and is required. A lender’s policy does NOT protect your investment. Only an Owner’s Policy helps protect your interests. The debt is settled, the coverage ends. An Owner’s Policy offers you protection for as long as you or your heirs have an interest in the property.
“This is a brand new home.”
There are several title issues that could exist even with newly constructed homes. While the structure might be new, the property on which it sits is not, and there could be title issues that exist with the land. Not to mention that mechanics’ liens could exist resulting from unpaid construction debts. Other potential issues include legal rights of access, easements, restrictions, covenants, HOA liens or other issues that may affect your ownership and enjoyment of the property.
“This is a foreclosure.”
If you’re buying a foreclosure, the only attorney to review the property’s back title and validity of the foreclosure is the attorney who performed the bank’s foreclosure work. There could still be clouds on the title or outstanding liens or debts that may surface after the transaction is complete.
“The sellers have lived there for decades.”
The amount of time the sellers owned the property does not translate to a worry-free transaction. There could still be unsettled issues that affect the property title, including problems stemming from life estates, home equity lines, refinances, divorce settlements, unpaid taxes, assessments, and municipal utility bills.
“I’m only buying land.”
There can be many title issues affecting vacant land. These include unclear property boundaries, unrecorded deeds or the discovery of prior interests due to omissions in wills and estate planning, divorce settlements and real estate taxation.
“I’m not going to own it for long” or “I’m planning to flip it.”
When you sell the property, the buyer’s title agent will be able to do more efficient work if an Owner’s Policy is already in place. Not to mention that, as the owner, you will be responsible for resolving issues that affect the insurability of the property. Title defects found during the settlement process can drastically diminish the ability to sell your home.
“This is just an investment property” or “This is just a vacation home.”
Regardless of how you’ll use the home, it’s still an investment – and an asset. Your house may be a vacation home, but it is still an asset worth protecting.
“I’ve been told that title insurance isn’t worth it.”
Considering that you only pay the premium for an Owner’s Policy of title insurance once and it offers you protection for as long as you or your heirs hold an interest in the property, title insurance is a valuable investment. This is especially clear when you compare the cost of the premium with the cost of defending and/or settling a title claim.
“I can’t afford another fee.”
It’s likely that this home is your largest investment. Your Owner’s Policy is a one-time premium. Once paid for the policy, you’re covered for as long as you own the home. The policy covers your heirs, too. Purchase a Owner’s policy alongside a loan policy, discounts could be available.
“I don’t see the value.”
While it may not be required by law, the issuance of an Owner’s Policy is considered the standard of care within the real estate industry. In fact, many real estate contracts automatically include a requirement for an Owner’s Policy to protect the buyer. Protect your interest with an owner’s policy; the bank already is doing the same!
“I looked at the title commitment/preliminary report and I don’t see anything that will be a problem.”
Title chain issues can surface later. For instance, fraud or forgery occurred in the past. An owner’s title policy would protect you from this fraudulent activity.