Title Insurance and the All-Cash Deal

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By Barbara Pronin

Your clients are paying cash for the home. They’re proud and happy to be able to do this and never again face a mortgage payment or pay interest on a mortgage loan. As their agent, you’re pretty happy, too, because an all-cash deal will likely close faster, clearing the way for a quicker commission payday.

Your clients are prepared to pay the required closing costs, and a handful of other fees. But they balk at buying title insurance. Why do they need it, they ask?

Because, you tell them, the one-time fee they pay for an owner’s policy will protect them against a host of potential threats to ownership for as long as they live in the home.

Real estate history is full of cases, you say, where unprotected all-cash buyers have been burned - like the man who bought a vacation home from a bank that had obtained it through foreclosure. But the wrong person had been served the foreclosure notice, making the foreclosure null and void and voiding the sale as well, leaving the hapless cash buyer with nothing but empty pockets.

Or the couple who paid far less than the asking price because the owner wanted a quick sale, only to learn too late that there were liens against the property that the seller had failed to disclose. Once the couple became the recorded owners, they were responsible for the debts.

In cases like these, as real estate professionals know, an owner’s title insurance policy would have provided protection.

Whether you are paying cash for the home or not, you tell your buyers, when you purchase a title policy, the insurance company protects your interests in most claims against ownership.

Your policy will have you covered against forgery, misrepresentation, fraud in document execution. It protects against problems regarding encroachments, mechanic’s liens, or property lines, or even if a missing heir of the previous owner turns up to claim a stake in the property. That owner’s title policy, you suggest, a fair price to pay in exchange for peace of mind.

As a trusted advisor, you know it’s your duty to help clients make good decisions, and because they trust you, they will likely take your advice and you can all sleep a little bit better. That well-worn axiom, “an ounce of prevention is worth a pound of cure,” is as true today as it was when Ben Franklin first said it nearly 300 years ago.

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.

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