Title insurance? Pro and Cons?

[Chris T.]

Hello all. I'm new to BP but has some limited experience with real estate investing.  First time post!

Anyways, I want to get your thoughts on title insurance. I just recently purchased my 2nd property through sheriff auction (with a lot of help w/ investor), and got my deed recorded. 

As far as I can tell, the title is clean but I am still new at this. Obviously I am stuck with this property regardless, but my question is, is it worth while for me to still buy a title insurance? My goal is to flip this house. Back up exit strategy is to rent it out / cash out refinance. The property is in Will County in the chicago land area. 

Any comments or feedback are greatly appreciated. 

[Marcello Di Gerlando]

I bought two houses this year at auction. I did not buy title insurance on either. I did however conduct a title search through my title company to see if there were any liens on the property. The search allowed me to make a decision -BEFORE- I bid on the property.

Not sure of the laws in your area. But how do you know that you bid on the first lien? You may have bought a second or third position. Do you have the title deed in your name already?

This is a common pitfall for folks unfamiliar with the auction process. Folks will think they are bidding on a property’s first position when in fact they are bidding on a junior lien and in fact will not own anything except a non performing note. Dangerous.

I don’t know how much title insurance will protect you at this point. By the time you have signed all the title docs you will probably have indemnified the insurance folks of all liability except for the most obscure and rare clauses i.e. someone has some ancient mineral rights to the land.

The title searches I do only show me if there are any financial encumbrance. It does not show me if there are issues with the property itself i.e. water rights, covenant violations, zoning issues, easements etc.

Just because I have purchased properties without insurance; in no way do I recommend anyone to do the same if they are not willing to lose the property.