If you’re in the fortunate position to purchase commercial property without having to take out a loan from a financial institution, you can avoid a couple added expenses that others may have to pay. For example, you won’t need to worry about private mortgage insurance, which is standard if your down payment is less than 20 percent of the mortgage amount. You also won’t need to worry about acquiring a lender’s title insurance policy, as this is only required if you’ll be securing financing to assist with your purchase.
As we’ve mentioned on this blog in the past, title insurance comes in two different forms. There is the lender’s policy that we touched on above that provides protection against title claims for the financial institution originating the loan for your purchase, and there is the owner’s title insurance policy that provides the same protections to the new property owner. Since you’re paying in all cash and are not required to secure a lender’s title insurance policy, is the same true for an owner’s title insurance policy? We explore that answer in depth below.
All Cash Purchases And Owner’s Title Insurance
Although lender’s title insurance will likely be required by the financial institution providing the loan for your purchase, it’s important to note that an owner’s title insurance is never required. It doesn’t matter whether you’re getting a million dollar loan or you’re paying all cash for your purchase, you are not required to secure an owner’s title insurance policy.
However, just because you can pass on an owner’s title insurance policy doesn’t mean you should. In fact, it may be even more important to secure an owner’s title insurance policy if you’re paying all cash for a property. If a legitimate title issue surfaces and you don’t have insurance, you could lose the property. It doesn’t matter that you paid full price in all cash; if someone else has a legitimate claim to the property, you can lose it all.
Moreover, if you have the financial means to pay all cash for your purchase, it likely means that you are in a somewhat decent financial position. Don’t jeopardize your financial situation by forgoing an insurance policy that can protect you in the event of an unexpected claim. You’re saving a lot of money with your purchase by not needing to pay PMI or acquire a lender’s title insurance policy, so put some of that savings to good use and secure some peace of mind with your latest commercial acquisition.
So while an owner’s title insurance policy is not required, it’s highly recommended no matter how you’re choosing to pay for the property. If someone else claims ownership of the property, if it turns out that a fence was built on a neighbor’s property line, or if there are unresolved tax or mechanic’s liens associated with the property, you will be protected from financial liability if you secure an owner’s title insurance policy.
At Commercial Partners, we can research your title, clear any obvious clouds and set you up with the right type of owner’s title insurance policy for your needs. Let us be your resource throughout the purchase process so that you know your financial interests are secure. For more information on how we can assist with your first or your latest commercial purchase, reach out to the team at Commercial Partners today at (612) 337-2470.