An Umbrella for Any Legal Rain Clouds
Ok, so as blog post headlines go, the above may not be so sexy (maybe if I added “Kardashian”?!?).
But, it’s one of the last hurdles before closing confronting Buyers.
The decision: whether to fork over $400 – $800 (or more) for a Homeowner’s title insurance policy, to supplement the mandatory lender’s policy (assuming there’s a mortgage).
Small Odds, Big Risks
Unlike most kinds of insurance, a homeowner’s title insurance policy is purchased with a one-time premium, payable at closing, that protects the homeowner from potential cloud(s) on their title.
Examples include:
–a messy divorce where it’s not clear if an ex still has an ownership interest.
–Recent work on the home that was completed but not paid for. Ultimately, the unpaid contractor’s invoice can turn into a mechanic’s lien, tied to the property.
–a backyard fence that is found to be encroaching on the neighbor’s lot — and they’re not happy about it.
–other liens — like taxes — that may have been looming but not identified prior to closing.
While the foregoing are all usually remote risks, the cost if they occur can be significant.
For starters, the unlucky homeowner would likely need 5-10 hours of help from an attorney.
Call that, conservatively, $2,000.
By comparison, an owner’s title insurance policy that costs one-third or one-half of that seems like a bargain.
Or even less than that.
On a recent deal, a Buyer client who previously decided to forego the policy changed his mind when we discovered that, thanks to a re-issue credit (from the previous owner’s policy), the premium would be 50% off.
