Have Title Insurance or Not?

Question

Hello Everyone;

Happy New Year!

Would love to gain additional perspective on my first purchase, closing this up coming week on a 2 family property in upstate NY. My question is should I purchase "title insurance" that is being offered? My attorney owns their own title search company. They go back 40 years. I've been told to the best of their investigation, the title is clean.

In NY, as I understand it, the state regulates title insurance. This would be an additional $1300.00 at the closing.

What might be the thought process of other experienced investors, if its clean over the last 40 years, should I get it. I'm paying cash for the property.

Thank you all in advance for your thoughts, it will certainly help me decide better.

Regards

Vince

Russell Brazil · Answer

Particularly falling the housing collapse, I think title insurance is very important.  Who knows what liens may have been attached to the property....or could even be attached hours before the closing without you realizing it.

John Blackman · Answer

ALWAYS buy title insurance.  ALWAYS.  The property may even be harder to sell without it.  You never know what can turn up and you want to push that risk off onto someone else.  Most investors spend a lot of time looking at the dollars, and they should, but many don't pay as much attention to the risk as they should.  Managing risk is in my opinion more important that going after dollars or yield.  Making less is better than a loss.  One bad deal can sink 10 good ones which is what happens if you aren't managing your risk.

Title insurance does just that!

Jay Phillips · Answer

I ALWAYS buy title insurance.  I factor in the purchase price + rehab costs in determining the amount to insure.  I come across folks all the time, including my own brother, who didn't purchase an owner's title policy and then discover an issue with an encroachment, etc.

Particularly important in this part of the country, because the chain of title stretches back a long way.  Our property descriptions are expressed in metes and bounds and can refer to markers that haven't been there in a hundred years.  Then there are the other protections like against fraud.  IMHO, a must have.

Vince Futia · Answer

Thanks Guy for your thoughts, well taken!

Guy Gimenez · Answer

@Vince Futia

"I've been told to the best of their investigation, the title is clean."

Note that this statement is not a warranty so it's worth just what you paid for it.

Don't be penny wise and pound foolish. Don't take a chance of some title issue or claim popping up and becoming your problem instead of the underwriter's (issuer of owner's policy of title) problem. I never purchase a property without title insurance as I've read far too many legal cases regarding the consequences of not having it and not having a good survey.