A shout-out to Christy Coffey, Assistant VP at Pacific Coast Title, who contributed to the publishing of this post. You can follow Christy on Linked In or reach out to her via email at: CCoffey@pct.com
There’s been a lot of misinformation in the SoCal media regarding “Attorney Opinion Letters” (AOLs) replacing title insurance policies.
FYI: Fannie and Freddie allow it; FHA and VA don’t! Nor will any lender as “AOLs are worthless to amny to lenders.
Why Title Insurance is Essential. Here’s why.
As we approach the beginning of the home-buying season, with many buyers deciding on their largest investment yet, title insurance is essential, giving homebuyers peace of mind and confidence that their property rights are protected.
COVID fundamentally changed the way we view homes.
Practically overnight, our homes became our workplaces, schools and gyms. But as our homes increase in value—it has never been more critical to ensure that they are protected.
While homebuyers may less understand title insurance, it’s important for them to understand the many benefits title insurance provides and the dangers that can be incurred without it.
As an agent, you must know the benefits of title insurance to educate buyers.
Why Title Insurance?
When a property is transferred from one owner to another, there may be undiscovered tax liens, forged signatures, recording errors, undisclosed easements, title claims, or other defects.
Despite strides made by technology to streamline the process of title searches, the title industry remains people-centered.
Skilled professionals remain essential, conducting detailed searches to ensure that a homeowner’s property is protected and carrying out involved processes to update and maintain sophisticated databases.
This insurance is a one-time fee paid upfront during the closing process. The fee is typically about 0.5% of a home’s purchase price.
The insurance protects an owner’s property rights for as long as they own the property. The longer a homebuyer owns a home, the more cost-effective title insurance becomes.
Most of the fee paid covers the cost for professionals with local expertise to discover, identify and repair issues caused by title defects that occurred in the past.
Because of these preventive measures, title insurance fundamentally differs from other forms of insurance, which charge annual or monthly premiums to protect future events.
Title insurance has lower loss rates than other forms of insurance. A claim is serious when it comes to a home’s title, and a loss threatens homeownership.
Low loss rates are good for consumers.
Title agents’ curative work minimizes the fear, disruption, and distress that title claims cause homeowners.
When a homebuyer refinances a mortgage, they pay off the old loan and get a new one; this requires the homeowner to purchase a new title policy to protect the lender.
The policy protecting the homeowner’s property rights remains in effect.
The lender wants to know, for instance, whether the homebuyer didn’t take on a second loan or home equity line of credit between the purchase of the home and its later refinance.
Likewise, the lender wants to ensure that if a homebuyer does any remodeling, the contractors are paid and no tax liens are held against the property.
While other forms of insurance have seen rate increases in recent years.
However, according to industry financial statements, the cost of title insurance coverage has decreased 6% nationally since 2004 and almost 2% the past two years.
These rate decreases have occurred even as home values continue to appreciate.
Additionally, nearly 75 cents of every dollar a title company earns goes directly toward staffing costs and access to databases.
Shopping around
Just like any other significant purchase, we encourage homebuyers to shop around to understand their options and make an informed decision when selecting a company to work with.
In many regions of the country, the seller pays for the title policy. Above all else, consumers need to ask questions about price, what’s included in their coverage, and any discounts available, including during refinancing.
The American Land Title Association’s consumer education website, www.homeclosing101.org, offers several resources to help homebuyers better understand title insurance and the closing process.
Shopping Title Insurance Prices in California
Lifetime protection from:
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Errors in public records
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Unknown Liens
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Illegal Records
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Missing heirs
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Forgeries
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Undiscovered encumbrances
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Unknown easements
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Bounders/ Survey Dispute
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Undiscovered wills
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False impersonation
“Keeping it Real”
Let’s say a homeowner purchases their home from a builder who did not pay his roofer.
Without title insurance, the new homeowner would be responsible for paying the roofer—even though the legal dispute occurred before purchasing the property.
In another scenario, a man sells his property to his girlfriend, pretending to be his wife.
A quitclaim deed is duly signed and notarized, but a few years later, during divorce proceedings, the real wife learns about the transaction and the quitclaim deed, which she never signed.
While most homeowners will fortunately never experience these sorts of legal problems, title insurance provides an important safety net and peace of mind.
Without title insurance, homeowners are not protected from a devastating financial loss that may result from a title defect, tax lien, undisclosed easement, or fraud or forgery.
When there is a loss, it is usually significant—sometimes in the hundreds of thousands of dollars.
When purchasing a home, homebuyers have enough on their plate. Title insurance provides one less thing to worry about for as long as you own your home.
Together, real estate agents, title insurance professionals, and other stakeholders involved in the transaction can protect consumers and provide them a better experience during the real estate closing process.
Copywrite © August, 2018 Daniel Dobbs, MHM Mortgage /// All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Daniel Dobbs, Author- VP-Broker Mutual Home Mortgage 265 S. Randolph #120 Brea, Ca. 92821 Cell: 949 250-3981 Dandobbs6@gmail.com NMLS #307631 BRE #00986886
