Benny L. Kass
June 21, 2013
Q: On new construction and paying cash (no lender financing), do I need to obtain title insurance on my new home?
A: That's the million-dollar (or whatever the title insurance will cost you) question. Is it necessary? Probably not. But notice I say "probably."
Title insurance protects a buyer from matters that are not necessarily on record. For example, several years ago, a large Virginia apartment building was sold. The buyer obtained title insurance, and collected on it when the wife of the seller announced that she did not approve the sale nor did she sign a contract or the deed itself.
The wife was not on the title; but in those days, she had what is known as dower rights — the rights of a wife to claim against the property of the husband. Many states have now abolished dower rights, since women have the right to own property in their own name without any involvement from their spouse.
But the buyer was very happy he had title insurance.
I was involved years ago in an adverse possession case. A sold to B, who then sold to C, and finally the property was sold to D. My client (B) obtained title insurance when she bought. Years later, D sued C, who then sued my client. B was the only one in the chain of title who had title insurance, and her legal fees were paid by the title insurance company.
Bottom line: When I conduct a real estate closing, I always explain the pros and cons of obtaining title insurance. When there is a lender, it's a no-brainer; the lender insists on lenders title insurance and the additional cost for the owner's policy is usually minimal.
It's in your situation where you have to make a decision — and such a decision (one way or the other) can be very expensive.
If you are a risk-taker, don't get the insurance. But don't say I told you that, if someone comes out of the woodwork and files a claim of possession or title.
Q: I purchased my home with cash through a sheriff's sale. I am trying to refinance and the bank is asking for a HUD-1, which I don't have. What should I
A: Humor the bank. Pull together all of the relevant documents that were involved when you bought the house, as well as a copy of the recorded deed.
If you don't have all of this material, I am sure that the person who conducted the sale — and prepared the deed — would have this info on file.
And you can get a copy of the recorded deed from the recorder of deeds in the county where the property is located.
Show all this to the bank. And if they still are reluctant to make you the loan, assuming you qualify, then I would look for another lender.
Benny L. Kass is a practicing attorney in Washington and Maryland. No legal relationship is created by this column. Send questions to email@example.com.
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