We understand that nobody wants to pay money for something that they may not end up using, but insurance is one of those things that you’ll really want to have in the event you need it.
Why People Pass On Title Insurance
We come up with reasons to rationalize our decisions every single day, However, the excuses we tell ourselves aren’t always the complete truth, or perhaps we don’t totally understand where our best interests lie. Here’s a look at some of the excuses we’ve heard from clients who are attempting to justify why they are thinking about skipping an owner’s title insurance policy.
“It’s a new build, there aren’t any title issues.”
You’re right, if there’s a new build, you’re probably not going to run into any issues about the building from a previous owner. However, you’re not just buying a property, you’re buying the land that the building sits on, and that land has been owned by multiple people over the years. If something went amiss with a sale in the past, or there are unclear property ownership records, not having title insurance can really hurt you, even if the building you’re taking over is brand new. Don’t assume that new builds mean that there are no issues with the land associated with the building.
“The owners have had the property for 30 years. If something was wrong, it would have come up by now.”
Just because something hasn’t happened yet doesn’t mean that it won’t happen in the future. This is especially true if you’re buying a property that has been with one family for a while. You may assume everything is in order, only to realize that a relative actually had a minor stake in the property, and your sale or a previous sale was invalid. Oftentimes a title defect doesn’t come up until a sale is imminent and research is being conducted, so the only reason that there haven’t been any issues in decades may be because nobody was really looking.
“The sellers seem trustworthy”
The sellers may be the most trustworthy people in the world, but that still doesn’t mean you should skip title insurance. Even if the sellers mean well, something out of their control or something they miss could cause major issues for you down the road if you don’t secure an owner’s title insurance policy. If they have unpaid property taxes or haven’t cleared a title defect from the past, it can become your mess to sort out if you move forward with the purchase. There’s also the possibility that you are working with someone acting fraudulently. Scammers don’t usually openly act like scammers. They try to come off as honest and reasonable people to gain your trust. If you end up working with a scammer and you don’t have title insurance, you may have no recourse to the funds you’ve spent.
An owner’s title insurance policy is something we highly recommend for most buyers. Although it’s unlikely that an issue will arise once you’ve acquired the property, you’re going to really wish you had insurance in the event a problem does develop. Don’t find yourself in financial trouble because you tried to rationalize away an insurance policy.
We’d be more than happy to help research your next commercial property and assist you in securing a title insurance policy that suits your needs. For more information, or for help with a different aspect of commercial investing, reach out to the team at Commercial Partners today at (612) 337-2470.