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It’s an All-Cash Deal: Why Buy Title Insurance?
By Barbara Pronin
In today’s competitive market environment, cash is sometimes king. Buyers who opt to shoulder the cost of a home by offering an all-cash payment may not only prevail over other bidders, but can bypass certain expenses a mortgage lender would have charged.
 
Lender’s title insurance would be included in the list of expenses from a mortgage lender if the buyer obtained a loan, but regardless of whether the purchase is all-cash or with a loan, all buyers benefit from owner’s title insurance. Every property has a history or a chain of custody, as experienced real estate agents will remind their cash buyers. The reason owner’s title insurance is valuable is that it acts as an indemnity policy against a variety of issues that could throw the new buyer’s ownership into question.
 
Your title company will thoroughly research the property’s history, but no matter how extensive the research, there is always the possibility of a ‘cloud’ on the title to appear. There may be no way to know, for example, that a previous owner forged a signature, lied about his or her marital status or had a will that was later to be challenged. Any of these circumstances could leave the new buyer open to unforeseen claims on the property.
 
Previously unreported liens on the property could suddenly come to light - an IRS lien, for example, or a creditor’s judgment, or a plumber claiming the previous owner owed him money.
 
All-cash deal or not, any of these instances could threaten the new buyer’s claim on title, even years after the purchase - and legally defending against such claims can be costly.
 
But the all-cash buyer who purchases owner’s title insurance, which typically is for a one-time, relatively low cost, is protected against title issues and/or financial loss due to liens, disputes between prior owners, clerical or recording problems, or fraudulent claims against the property.
 
Without question, few of today’s cash deals are likely to be threatened by such a disaster. But, as most of us have been advised all our lives, ‘better safe than sorry.’ The minimal cost of title insurance is a small price to pay for peace of mind that lasts as long as the buyer owns interest in the home.
 
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.

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