Ask Cora Hey Cora: I am buying a house from my parents. They have owned it for 20 years, but our mortgage company is requiring that we get title insurance, why do I have to do that? Is there any way that I can get around paying for this? Thanks, Dirt Cheap Dear Dirt: Well, yes and no. Don’t you just hate answers like that, it’s not really an answer at all… it’s just a big teaser! But I have to answer like that because it’s not black and white, well maybe a little, well not really at all... Okay, first, let’s talk about what title insurance is and what it isn’t. What does title insurance cover: Improper execution of documents, mistakes in recording or indexing legal documents, forgeries, and fraud, undisclosed or missing heirs, unpaid taxes and assessments and unpaid judgements and liens. Whew, that’s a lot of “un’s”, and these are just the common things. Some of these issues can come up years later, long after you have purchased the home. Title insurance is a policy that protects the “past” of your property. Now, I know that sounds strange, but let’s get into story time, because title is very boring. This should help. Make sure you create a mental picture in your mind: Let’s say that when your parents bought that home, they bought it from a guy named Buster Quackenbushel, who’s grandparents Al and Mini Quackenbushel owned the house. They both passed and the grandson, Buster, sold it to your parents. Let’s also say that your parents did have title insurance when they purchased the home from Buster Quackenbushel. Now here we are years later, 22 to be exact and out of the jungles of South America comes a long-lost grandchild of Al and Mini, Prudence Quckenbushel! She’s been doing humanitarian work in the rainforest for 25 years. She finds out that her cousin Buster has sold her grandparents’ home and kept all the money! Prudence was planning on starting a Mini Marmoset research foundation called Gramma Mini’s Marmoset Mission, and she’s not happy. Prudence hires a crackin’ good attorney and he discovers that title insurance was purchased when Buster sold it to your parents, so the policy steps in and tries to find “what when wrong”. Why did they not discover there was another heir? Did they try and contact her? Does Prudence have any rights to the property or the proceeds from the sale? It’s their job to find this all out, and you don’t have to worry about it you are insured for the past. So, let’s say that you decide to forego the insurance when purchasing this same home from your parents. You can, however, you are not protected from mistakes in recording, judgements, liens, and the like. If you are planning
Brought to you by on getting a mortgage to pay your parents, the mortgage company will require that you have title insurance. They will not release a loan until you do. So, there’s that. However, if your parents are just going to allow you to make payments to them, then you would not be required to get title insurance. Mom and Dad are great and say sure son, just pay us $1,300 per month and the house is yours. Wow, what could be better. Well as great as mom and dad are, they did forget to mention that the city came through and paved their streets a few years ago. They also put in streetlights, sidewalks and a lovely little park with a wading pool and metal stands that dispense free doggy poop bags! It’s very nice, and expensive! Because a special assessment was put on the house that created a lien of $16,700 per lot owner. Your parents forgot to pay it, and now are living social security check to social security check while traveling in a 5th wheel across the USA with only a flip phone and a black and white Shiatzu named Gordo! Mom and Dad don’t have the money, you don’t have title insurance, guess who pays.. yup, you do, Dirt Cheap! Now, don’t get me wrong, mom and dad wouldn’t do that to you, but things happen all the time. Title insurance simple stated, is to ensure that the owner is lawfully in possession of that property. It protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances, or defects in the title to the property. Each title insurance policy (like any other insurance policy) is subject to specific terms, conditions, and exclusions. It's different from other insurance such as car, life, or health insurance that protects against potential “future” events and is paid for with monthly or annual premiums. A title policy insures against events that occurred in the past of the real property and the people who owned it, for a one-time premium paid at the close of escrow. Title insurance protects against claims from defects. No, not a broken drawer in the bathroom, but these defects could be things like another person claiming they own the property or an ownership interest in the property and they want it or money! So, Dirt, I would say that title insurance is valuable AND you only pay it one time! And that’s it! Just once! It’s hard to believe that these things happen, but they do, the courts are full of cases that involve property, that’s why there are attorneys that handle just real estate law! Get Title insurance when you close escrow on real property! Okay, I am done nagging for now. April 2022
Call Cora Today! Keller Williams Realty Alaska Group Of Wasilla 621 S Knik-Goose Bay Rd Wasilla, AK 99654
www.clcandassoc.com
907.982.5700
GreatLander Real Estate Guide
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