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15
DO I NEED BUYER’S TITLE INSURANCE? -- Part I
As both a real estate and mortgage broker in the state of Florida for many years, when I moved to my real estate company to West Virginia, I was surprised at the many differences between how things are done 
in the Sunshine and Mountain States.
In real estate there is national law, state law, and just plain how-we-do-it-around-here. That latter category covers a surprising number of things, including who pays for what at closing, how commissions are shared between Realtors, home inspections, and terminology, to name a few.
One of the big differences is that, in West Virginia, buyers rarely purchase Buyer's Title Insurance (also known as Owner's Title Insurance, or an Owner's Title Policy) at closing. In Florida, virtually all buyers are provided with owner's title insurance, which is customarily paid for by the seller. Here in the Mountain State, buyers are often not told what an Owners Title Policy is, or even offered it. While this creates a short-term "savings" on the buyer's closing costs, it can also create long-term hardship and heartache, a fact which was recently brought to a painful forefront on a home I was selling.
There are two kinds of title insurance: lender's title and buyer's/owner's title. As far as I am aware, no bank in the country will loan you money to purchase a home without lender's title insurance in place which, I hasten to add, they charge the buyer for. Title insurance insures the policy holder against any "clouds" in the chain of title for a piece of property. Clouds are liens (attempts to collect debt), or claims by other parties for ownership in the property, either of which can land you in court and, in some cases, actually cost you your home. "But wait," you might say, "didn't the closing attorney search the title, so isn't it safe?" Well, probably. But lawyers are human and make mistakes just like the rest of us, and do occasionally miss something. In addition, there is a "gap" of as much as several weeks, between the date the title attorney does the search, and the actual closing date. There can easily be instances in which a title attorney would do a thorough search, find the title to be clear, but a lien or claim is recorded during that gap, which would then constitute a cloud on the title.
According to Morgantown real estate attorney, Sean Buckley, "People who work and live in the real estate industry realize the need for an Owner's Title Insurance Policy. This is because there are many types of title defects that even the most careful title examination may not uncover. According to www.OldRepublicTitle.com, examples of these hidden title flaws include, but certainly are not limited to:
- Forgeries and fraud
- Undisclosed or missing heirs
- Mistakes in recording or indexing of legal documents
- Unpaid taxes and assessments
- Unpaid judgments and liens
These are just a few of the hidden flaws that may cause large legal expenses for a new home buyer. This is why most banks require a Lender's Title Insurance Policy at the time of closing."
In the case of my seller, he purchased the home in 2015. No sooner did he start unpacking, when his job transferred him out of state and he had to turn around and sell it. I listed the home and quickly had a buyer, but the title search revealed that the local attorney who did the title search back when he purchased the home had missed four Federal tax liens against the property, totaling over $54,000.00.
These liens had nothing whatsoever to do personally with my seller. They were filed against the woman from whom he'd purchased the home. But clouds, liens, and claims, carry forward with the property. So, unless he paid the liens – which the IRS could come after him for by seizing the property – he couldn't sell the house.
My distraught seller repeatedly protested, "But I bought title insurance; it's listed right on my closing statement! I should be covered!" But the title insurance he'd paid for wasn't a buyer's policy, it was a lender's policy and offered him no protection whatsoever.
So, Mr. and Mrs. Buyer, do you really need title insurance? Like auto insurance and medical insurance, you don't need it until you need it. But with your home at stake, if clouds come to haunt you, you will look back and dearly wish you had paid a few hundred extra dollars at closing for the protection and peace of mind.
"If you have any questions about the value of an Owner's policy," says Sean Buckley, "you should obtain competent legal advice from an attorney well versed on the subject." At Heritage Real Estate, we encourage all buyers to purchase title insurance. It's simply risky not to.
Bill Porter, Broker
(304) 612-3746207 Aurora Dr
Morgantown, WV 26508
WEST VIRGINIA LICENSES BROKER WVB240300963
AGENCY 010271-00
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Office License No. 010271-00