Owner’s Title Insurance – When you should buy it

Owners Title Insurance Made Easy! What is it and when you should buy it.

There are two types of title insurance: Lender’s and Owner’s.
1.Lender’s: Required when you get a loan. Does NOT protect you. Protects the Lender. You pay for it. Lenders don’t want common title defects to cause their loan to you to become all or partially unsecured!*
2. Owner’s: Optional. DOES protect you, the home owner. It is available, and it is advised that you obtain it. You’ve got a 12%-15% chance of legal defense and/or up to & including forfeiting your home and all its’ equity.*  

*99% KY settlement agents / title companies sell insurance through one of the big-four national title insurance companies, whose premiums are almost identical. This means title insurance premiums will essentially be the same, within pennies usually, regardless of which settlement agent you close with.

What’s your risk? 12%-15% of all transactions in KY result in a title claim due to title defects surfacing. A title claim is where someone claims they have an ownership interest in your home, in whole or in part; and they are demanding payment, up to & including you having to forfeit your home and all of your equity to them.

How do you get rid of a title claim…when you DON’T have owner’s title insurance?

1. Pay off the title claim before going to court – A few thousand dollars up to the full value of your home.
2. Go to court at our time and expense & win: Defend the title claim in court at your time and expense, regardless of the length of the lawsuit. Win.
3. Go to court & pay a costly settlement after incurring legal expense to defend the title claim in court;
4. Go to court and lose, after costly defense, and be forced to pay off the full title claim, up to & including forfeiting your home and all the equity you have in it.

The cause of title claims – HIDDEN title defects:

1.Valid liens recorded after title search has been conducted – filed by creditors, governments, agencies, etc.
2. Valid liens improperly indexed by county clerk personnel, thereby making them invisible, but not in-valid.
3. Undisclosed or Missing Heirs
4. Suppressed Wills
5. False Declaration or Forgery of Deeds, Releases, and Wills, etc.
6. Disability of Grantors by Reason of Minority, Competency or Impairment
7. Fraud Duress, or Coercion in Securing Grantor’s or acknowledging Officers’ Signatures
8. Deeds delivered after death
9. Recorded instruments executed by persons acting under voided powers of attorney, voided by death or insanity of principals
10. Secret or common law marriages
11. Birth of children subsequent to date of parents’ will
12. Falsification of records; False impersonations
If defects are hidden then it does not matter how many title searches have been done, or will be done on a  property.

How do you EASILY get rid of a title claim when you DO have owner’s title insurance (OTI)?

1. The title insurance company will defend the title claim for you in court, at their time and expense, and
2. Pay off the title claim for you if they lose. They lose approximately 50% of all title claims they defend.
3. It is a one-time premium.
4. There is no deductible; you have first-dollar coverage.
5. You are covered up to 150% of the purchase price, so as your home’s value increases, it is covered.
6. You are covered as long as you have an ownership interest in the home – You never have to buy it again.
7. Owners title insurance covers you against title claims due to PAST and FUTURE title defects that surface.
8. Reasonable premium versus significant coverage.
9. The discounted premium to purchase owners coverage is available for up to 30 days after closing.
10. After 30 days, premiums revert to full cost, which is often more than double the discounted amount.

So, do you need OTI every purchase? That depends upon your risk tolerance and what helps you sleep at night. But, there are 5 scenarios where we ALWAYS recommend you buy owners title insurance, because your risks are FAR higher than the average 12-15%:
In these FIVE scenarios:

  1. Cash purchase – Since your down payment is at risk, when is your down payment substantial? When you’re putting down 100% (or a large portion) of any purchase price. Can you sleep knowing that there’s a 12%-15% chance that you will lose up to ALL of the cash you’ve just put down to buy your property?

  2. Pre-foreclosure – If the seller is not paying their house payments, they are not paying any other creditors either. Creditor liens could be recorded at any moment after our title search

  3. Post-foreclosure – It is not uncommon for liens to be missed by foreclosure law suit, meaning there could be perfectly valid liens against the property that surface after you’ve purchased it.

  4. New construction or major renovation – Contractors and sub-contractors argue over payment for work.  When the sub wins in court he records a materialmens’ lien against the home, which may occur after we’ve done our title search. This would cause considerable difficulty in selling or financing your home, including financial loss to remove that lien.

  5. When the seller is an ESTATE – Heirs often dispute many areas related to finances in a family member’s estate, after real estate has been sold, whether the Executor is a family member or not. Estates create opportunity for illegal actions of heirs and fiduciaries which may affect the validity of the sale of the real estate to you, as well as creating a host of other issues that may cause you substantial financial loss.

Call Jett Title with your questions, the details of your purchase’s situation, and for a premium quote.  Thank you.