I am buying house, do I really need title insurance?

Prior to the closing of title, the public records are searched to find all document which affect the ownership of title, including among others, mortgages, judgments, and covenants, easements and restrictions. A title search is conducted against the property using an abstract search. The abstract search serves as the basis for the creation of a title commitment. Simply put, a title commitment is a report which discloses the results of the abstract in a standard form. Additional searches are performed at the request of the customer as part of the title commitment, i.e., a lender and a purchaser in New York request a certificate of occupancy search. A title insurance policy is issued based upon the results of the title commitment.

Title insurance is a policy issued by an insurance company guaranteeing that the title to real property is free and clear of all issues and properly in the name of the owner and that the owner has the right to transfer or sell the property to a purchaser. In the event that a title issue rears itself, the insurance company will pay the damages to the new title holder or take actions to correct the issue.

In my opinion, the definition of title insurance is a policy usually purchased by a buyer to protect against human error (i.e., mistakes in examining title) and adverse claims that exist against a property prior to the issuance of a title insurance policy (usually the date of your purchase). Essentially, any claim of right or lien prior to the date of your ownership (the date of your policy) is extinguished with the purchase of a title insurance policy. Without title insurance policy you are defending all rights and claims of others out of pocket. Do I need to tell you how much a lawsuit costs to defend? Imagine that you have a complete failure in title which would require you to forfeit the property. All the money you paid for the property would have been lost. Moreover, if for no other reason, once you sell the home, the title insurance policy serves to extinguish any matters prior to the date which you owned the property. In order to protect your property rights, you absolutely should purchase a title insurance policy.

What can possibly go wrong?

  1. Incorrect property descriptions
  2. Wild deed chains
  3. Wild mortgage chains
  4. Claims by those who stand to inherit, including, undisclosed heirs
  5. Fraudulent conveyances to defraud creditors
  6. Property placed on the wrong property during new construction
  7. Open mortgages of record
  8. Open liens and judgments of record
  9. Forgery
  10. Covenants, easements and restrictions

How much does it cost?

Title insurance is a one time charge at the closing of title. In New York, the cost varies based upon your purchase price and your loan amount. The fee is set by statute. The policy lasts so long as you own the property. Any transfer in ownership of the property voids the policy.

I received a notice in the mail that says I can get a copy of my deed by paying this third-party company. Should I pay it?

A company forwards you this letter which solicits you to buy a copy of your deed. In a twist of words, it appears that you need their service. You submit some monies and within a couple of weeks you get a copy of your deed.

Of course, my grandmother gets a copy of this letter and immediately calls me. Paul, you have to take a look at this paper, it looks like I have to pay these people. For whatever reason, my grandmother is not the only one that falls for this solicitation. I have had numerous clients and family members ask me the same thing.

I personally have received this notice from this company that in a round about way words their solicitation to entice you to get a copy of your deed. Obviously, I toss it along with my other junk mail. Is this a scam? To the extent that this company actually obtains your deed, it may not be a scam. But, let me ask you this, had you not received the letter, would you have thought about trying to get a copy of your deed? Can you trust that this company, which solicited you, will get your deed?

The fact that you have misplaced your original, recorded deed does not mean that someone can steal your house if the deed somehow falls into the wrong hands. The deed is recorded in the county clerk’s office (or register’s office) depending on the county. It is a public record, so you or anyone can obtain a copy of the deed by simply going down to the clerk or register’s office.

You may have a copy of the deed among your personal effects from your closing. I would be skeptical about purchasing a copy of my deed from a company that has solicited me. So, to that end, if your deed is lost, try locating the title company or attorney that closed your file. If a copy is not in their possession, you will be guided to the clerk or register’s office, which is where you should go anyway.