Title insurance - sensible closing cost or scam?
January 31, 2012 10:36 AM Subscribe
Should I purchase owner's title insurance for my new home?
posted by seppyk to Home & Garden (29 answers total) 3 users marked this as a favorite
I am in the process of closing on my first home. Beyond the mandatory costs and fees (lender's title insurance, registration fee, certificate fees, underwriting fees, etc.), our attorney that will be managing the closing process has recommended that my wife and I purchase owner's title insurance.
He (the attorney) stated that owner's title insurance protects the buyer should another party make claim on your property and legally win ownership of the title via litigation. The added costs to closing will be about $800. In addition, the attorney stated while this cost is optional, I would be a fool not to purchase it given the total cost of purchasing the house itself. He also admitted that he will get a kickback if I purchase it. Other special snowflake features - house was built in 1956, sold to second couple in 1976, now being sold to us in 2012. Both the original owner's and second couple have passed away. The second couple's children are now selling us the house as the property has been put into their trust.
After doing some investigation on owner's title insurance, it is additional protection if my attorney makes errors when doing his diligence in the initial title search. There also appears to be rampant price fixing and poor coverage should a claim come up. As further anecdotes, none of my parents (mom, step-dad, in-laws) have owner's title insurance. Our loan officer also stated she has not seen one application of owner's title insurance claims in the 25 years she has been servicing mortgages.
If the progression of ownership is clear along with clarity on the mortgages/lot boundaries/lack of leins, should I even bother or is this money down the drain? My ultra-cautious side says to purchase it while my BS detector is going off as this looks like a scam marketed to home buyers by fear, uncertainty, and doubt.
For other home buyers and home owner's, will you or did you purchase owner's title insurance? What was your reasoning behind your decision to purchase it or decline the insurance?