A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
The confusion with Title Insurance
A few years ago, I had a client that was incensed that he
had to pay Title Insurance when he sold his home. No one could really explain
to his satisfaction that it was for his protection. In this case the home was
new when he bought it, so he was the only owner and that made the situation
even more confusing for him.
It all comes down to the lawyers as usual it cost the
consumer money.
What it comes down to is protection forever. My client’s contention
is that he paid for the insurance when he bought the home and it makes no sense
for him to have to pay it again, but what he did not realize is that he did not
pay for his protection when he bought the home, confusing, absolutely.
When you buy a home and pay for Title insurance, you are not
paying to protect yourself but the bank that is funding your loan. The seller
whether it is an individual or the builder, is paying to protect themselves from
any title issues and those issues can come up years down the road. That is why
both the seller and the buyer pay for the insurance on the same property, each
pay for a different reason.
I know it still does not make sense that insurance
is being paid by two people on the same property, but that is the way it works.
Here is why the insurance is even necessary. The title company’s
job is to research and make sure that when a property is sold that the title to
the property is clear of any issues. They are taking the risk by selling the
insurance that if they make a mistake and miss something that the title company
is responsible for any monetary losses from lawsuits concerning the title. Even
if the home is a new home, and there has only been one owner, the land was
owned by others and bought by the developer and there could be title issues for
the land and that makes it irrelevant that the home was owned by only one
person.
When you buy a home and get a loan from a bank, the bank
is going to want to be protected from any title issues, so you are paying to
protect the bank and he seller wants to protect themselves from any title
issues, so they pay to protect themselves and when you sell the property, the
cycle continues.
You may ask, “If the title has been searched, why does
insurance continue have to be bought”. The answer is that things could be
missed by the title company during the search and they are taking the
responsibility if they miss something and with every new owner, there could be
title issues and a new search and new liability is created. As a property is
bought and sold a “Chain of Title” is created, and that chain gets more and
more complicated as it grows.
The next question I get is why do both parties pay and the
answer is that if only one party paid, the amount would be the same, the burden
would be just on one party, the majority of the time, the amount is paid by
both parties so the burden is spread out.
I know the explanation does not make you feel better, but I
at least hope you have a better understanding of the reason you are paying for
the insurance.
A.D. Cantelmo Property
Management Specializes in Property Management in Orange County
Ca.