Learn why an owner's policy is important
When TRID requirements go into effect, lenders will begin issuing a new Closing Disclosure to homebuyers. This new form will list the Owner’s Policy of title insurance as an “optional” purchase. While owner’s title insurance has never been required, this “optional” language could spur questions regarding the value of title insurance. Below are some of the more common “objections” to the purchase of an Owner’s Policy, along with suggested responses and existing resources that you might want to share with your customers in order to better illustrate the value of title insurance.
“I’m already paying for title insurance.” This charge is for a lender’s policy of title insurance, which protects your lender. This coverage is required, but does not offer protection for your investment. Only an Owner’s Policy helps protect your interests. In fact, your bank’s loan policy only covers the amount of the mortgage and only lasts until that debt is settled. 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.