When legendary Minnesota Vikings wide receiver Randy Moss was once asked how he would pay the fine he received for fake mooning the crowd at Lambeau Field after scoring a touchdown, he replied “Straight cash, homie.” If you’re like Randy and plan on making your next commercial property in all cash, you’ll probably find that you’ll have a few less hoops to jump through to move forward with your purchase. However, just because you can forgo some steps, doesn’t mean you should.
For example, when financing a commercial purchase with the help of a lender, you’ll typically be required to purchase what’s known as title insurance. As we’ve talked about on the blog in the past, lender’s title insurance protects the bank in the event that they finance a purchase only to discover that there was an issue with the title. Perhaps the original seller didn’t have the right to sell the property that was financed, or a long-lost relative comes out of the woodwork with a legitimate claim to a property. Although these events are rare, they do happen, and title insurance protects the lender in these situations.
Since you will not be financing your latest commercial purchase, you do not need to purchase lender’s title insurance. However, there is also an option to purchase a buyer’s title insurance policy. As the name implies, this policy protects the purchaser - you - in the event that someone makes a claim on your property months or years after you’ve acquired it.
Owner’s Title Insurance
While some other types of insurance are required, you are not required to purchase a buyer’s title insurance policy if you’ll be paying all cash for your next commercial venture. With that said, we highly recommend that you consider the policy.
For starters, even when a title search is conducted, there’s no guarantee that every potential issue is uncovered. Should something come up after you’ve purchased the property, there’s a real possibility you could lose your property and the cash you’ve paid without a buyer’s insurance policy. It’s a one-time purchase that provides you with financial peace of mind for as long as you own the property, so for that reason, we think it’s worth it.
It’s also worth noting that scammers love the idea of working with a buyer who will pay all cash. They can get their money and get out of dodge before anyone is wiser. Buyers love paying with all cash because the process can move quicker and they can avoid paying interest on a loan, but if they rush through the process without doing their due diligence, they can get burned. A buyer’s title insurance policy will protect you in event that someone is trying to take advantage of you, or if a truly unexpected claim is made on your property sometime in the future.
Buy with cash and buy with confidence when you purchase a one-time buyer’s title insurance policy for your commercial property. Whether you need help clearing a title or purchasing a policy for a commercial property, we can be your professional guide throughout the process. For more information, or for answers to any questions you have about buying and protecting a commercial investment, give the team at Commercial Partners a call today at (612) 337-2470.