Now that real estate transactions are increasing, and purchasers are still looking to save money, I am getting asked (a bit more than I used to) by the purchaser: Do I really need title insurance? My answer is yes. Title insurance is a one time purchase for as long as you own the property. Do you question whether you should buy homeowner’s insurance? Chances are you will not have to make a claim, however you purchase it for the peace of mind that if you need it; it’s there.
The same should hold true for title insurance. Title insurance provides you protection in the event there is an existing lien that was not found at your Closing or a prior one. It also protects you in the event a lien is filed in the “gap”. For example, the people, who are selling you their house, get the requested repair work done in order to sell. Maybe they didn't pay the contractor or the contractor didn’t pay his subcontractor. One of the unpaid worker’s files a lien for nonpayment. He has 90 days from completion of work to do so. Since the work was so recent the purchaser most likely will not receive notice until after he closed and the seller has moved out of state. Purchaser didn’t incur the bill; however it is now a lien against his property, so it’s now his issue to handle. Title insurance covers this claim.
Just this week, I had an instance where an old loan was not removed from record by the previous closing attorney. Although it was paid, it was still a recorded lien at the county court house. The seller was packing her house, dealing with the movers and the last thing she wanted to do was contact her last attorney (who by the way is no longer practicing law) or the bank that gave the outstanding loan to the previous owner. Guess what! The bank has merged two times since that closing…would you like to try and speak with someone at a large national bank and get transferred ten times to someone who has no records of a loan payoff from the predecessor bank?
Closing was not an issue for the Seller at my closing because she had title insurance. A copy of that policy allowed me to issue new insurance to my purchaser/client and take the risk of any outstanding lien or loan away from the purchaser. There is enough to deal with when buying or selling a property. My advice is to allow your one time purchase of title insurance make things easier. Hopefully you won’t need it, but if you do it’s worth the investment.