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what is title insurance? do i need that?

i m a first time condo buyer 
i want to know what is title insurance for?
I'm paying with full cash (no loan)
can you tell me what is title insurance? what is that for? do i really need it? when? 
i already offered one condo and seller already accepted but the bank count offered me back. so i count offered and I'm waiting them to accepted my offer this time.. 
but i think i need to know what is title insurance for..
thx
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December 02 2013 - South Tacoma
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Answers (11)

Title insurance on a condo would be primarily to make sure that the person you are buying the property from actually owned the unit, and that there are no encumbrances against the property that you do not intend to be there after you buy.  To verify that otherwise you would need to go down to the Pierce County recorder (or website) and check the grantor/grantee index from the time of the creation of that unit, and if you made a mistake the loss would be yours.

Title insurance can cover other things too, but on a condo unit that would be the main thing.  It would be foolish, IMHO, to not get title insurance, even though it is somewhat of a ripoff.
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December 05 2013
"and once i get the copy of deed from escrow office 
the condo is 100% mine right? and there is no liens on the deed 
since i paid full cash to escrow office."

Well, the point is to ensure (and insure) that it is 100% yours (or that you are compensated if there was an oversight, mistake, or unknown situation): title insurance can cover liens or claims to ownership (false or legitimate) that didn't show up on a preliminary title search.

I'll point you back to my last response, where I noted the following situation: What if the seller inherited the house under the terms of a will that was later found out to be out-of-date and a more recent will left the house to someone else. 

In that event, the seller never had the right to sell the property…however, there is no way that a title search could reveal that or that you could know that when you purchased it. However unlikely, what if the rightful owner comes back to claim what is legally theirs and the court awards the home to this long-lost relative? This is where a title policy will generally cover your financial losses, though you might still have to move out of the house. 

Or, to bring up a couple other situations I mentioned:
- What if the seller purchased the home from a single woman, not realizing that her ex-husband still co-owned the property…and never got his signature as required for the sale, but the sale still somehow went through. Now your sale goes through. What happens if he just now realizes that he had an ownership in the house and it was mistakenly sold? Well…title insurance would typically step in to cover you. 
- What if unpaid Taxes, Child Support, or Contractor's Fees were legally liened against the house, but maybe a name was misspelled somewhere and the title company didn't find it. It didn't prevent the sale, but someone fixes it, and now there is a lien against the house? 

If you are paying cash, you generally have more to lose than if you are taking out a mortgage (since a lender requires a policy be taken out to protect their interests and your losses are limited to the money you've put into the home). 

Whether you "need" title insurance depends on what your risk tolerance is and how devastating it would be to lose your entire investment (plus potential legal fees) if you didn't have an owners policy. 

Also, to clarify one of the other comments - a lender's title policy (in the state of WA) is traditionally paid for by the seller and the buyer traditionally pays for an owner's policy. If you are paying cash (thus, not in need of a lender's policy), it is common for a seller to pay for an owner's policy on your behalf instead. However, you MUST double check this with escrow, title, and your agent to clarify and make sure…along with all of the items/situations where you would be covered (I am not an attorney, title representative, or otherwise - so check with a professional in that field to make sure you know what you are buying and how you are covered). 

I hope that helps! 
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December 03 2013
Discuss the title insurance with the title company that you will be using for the closing, they will be in a position to better explain it to you.  By the way....title search is done by the buyer not the seller, so you will be paying for the insurance, but its well worth it..
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December 03 2013
James, you need to talk to the title company and the escrow company.

All the best,
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December 02 2013
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and once i get the copy of deed from escrow office 

the condo is 100% mine right? and there is no liens on the deed 

since i paid full cash to escrow office.
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December 02 2013
Yes, but not just fraud or forgery. Claims to title can be legal and legitimate…mistakes happen, and liens or rights to ownership may have been missed through a title search by the title company (or a previous title company)…or may not have been known (see example #3 below). 

Here are a few more examples:
1) The seller may have co-purchased the house with a brother he hasn't talked to in ten years and is now unaware that he needs his brother's signature to sell. 
2) The seller may have purchased the home from a single woman, not realizing that her ex-husband still co-owned the property…and never got his signature as required for the sale. What happens if he comes back and makes a claim against the house? 
3) The seller may have inherited the house under the terms of a will that was later to be found out-of-date and a more recent will leaves the house to someone else. 
4) Taxes, Child Support, or Contractor's Fees were legally liened against the house. 

In any of these situations, title insurance would step in. 
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December 02 2013
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so... title insurance means protecting myself from fraud and forgory?
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December 02 2013
Hi James,
It sounds like you are purchasing a short sale…which may provide even more reason to purchase title insurance. You don't know what the sellers have promised to others if they were in a difficult financial situation, what legal claims may be made in the future, or what other title issues may arise down the road. 

To put it simply, if you do not have an owner's title insurance policy and a legal claim is made against the property you purchased, you will have to defend the claim with money out of your own pocket. If you lose the legal battle, you may be in danger of losing the property and have no recourse. 

Purchasing title insurance will help protect you from these disputed title issues. Imagine that you close on the condo and the previous owner's brother shows up and argues that the home was left to him in a will. Or that the previous owner gave him a percentage of ownership in exchange for some money (remember, if you are purchasing a short sale…so there was likely a financial hardship). Or imagine that the previous owners had some work done to the condo, but didn't have the money to pay for the work…so the contractor placed a lien against the property. If you have title insurance, the insurance company will help protect you against those claims.

Title Insurance is a one time fee, paid at closing. It's well worth the cost in light of the potential issues that could arise.

Best of luck! 
Ryan Halset, Realtor
Seattle Magazine, Best in Client Satisfaction
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December 02 2013
A few more thoughts: You pay a one-time fee for title insurance at closing and it's valid for as long as you or your heirs own the property.  In Virginia, you can get an enhanced policy that will also cover you against such things as liens placed on the property after closing by workers who made repairs or improvements to the property that the seller failed to pay for, unpaid condo fees and assessments, etc.  When you have a mortgage, the lender will require you to buy title insurance covering the amount of the loan, and you can buy owner's coverage to protect the amount of your down payment and your future equity as you pay off the mortgage. When you pay cash, title insurance is optional (at least, in Virginia, where I'm a licensed real estate salesperson). Title insurance (at least in Virginia) is very profitable for the title insurance agent, usually the company that handles the settlement.  I have negotiated a 25% discount on title insurance for my clients. If the seller recently bought title insurance and the seller will provide you a copy of the policy, you may qualify for a "reissue" discounted rated.  If this answer was helpful please click the thumbs-up below.
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December 02 2013
Chas gave a good description. The lender will require lenders title ins and your owners title ins is optional but it is a good insurance policy that you pay just once and worth having.


tim
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December 02 2013
Title insurance protects the buyer if a covered problem arises with the "title" (official record of ownership) that was not found during the title search, such as errors or omissions in deeds, mistakes made by the settlement agent in examining the title records, a forged deed (not unheard of in cases of divorce or death of an owner),or undisclosed heirs.  Although these title problems are rare, if you don't buy title insurance, you could lose the property, and you may not be able to find the seller to sue (or the seller may not have the money to pay a judgment that you would get against him or her in court). I always buy title insurance on my own purchases, and I recommend owner's coverage to my buyer clients.
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December 02 2013
 
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