Fischer: Some adventures, like forgoing title insurance, just aren’t worth it
According to Helen Keller, “Life is either a daring adventure or nothing at all.” Amen, Helen. Risk is inherent, imbedded in each moment of life, it is the very thing that sets apart the living from the existing. While I am certainly a self-proclaimed adrenaline junkie, I also subscribe to the school of calculated risk taking. In general, this means that I need the stats and facts to back up the science behind the risk before I jump. In other words, I still have insurance policies in place.
Unfortunately, the risk of harm and injury isn’t just reserved for those participating in extreme physical events. If so, health and life insurance would be the extent of the needed coverage. Although, as a side note, I recently learned that jumping out of an airplane can preclude you from qualifying for life insurance. Back to the topic at hand, as it turns out, we also need insurance for our cars and our homes, the type of coverage of which can vary depending on the need and value of stated items.
Title insurance, however, is just as necessary, but quite a different animal altogether. While homeowner’s insurance covers loss or damage to property, title insurance protects against issues that can threaten ownership of your property. Sadly, not every buyer puts this into place when purchasing a property, which can turn out to be a very costly mistake.
If a buyer is financing the purchase of a property with a mortgage lender, the lender will require a policy to be in place to protect their interest in the property. This policy does not, however, cover the homeowner’s liability. In Utah, if a buyer has made the wise choice of protecting themselves by using the services of a licensed Realtor, this is covered in section 6 of the Utah Real Estate Purchase Contract. This section essentially states that the seller will pay for a title insurance policy for the buyers.
It is critical that this is not overlooked. In any transaction, the company chosen to do this search is up to the client. If the client does not have a preferred title company, the Realtor can recommend one. If paying for a property in cash, both the buyer and seller must use the same title company appointed by the seller. If the property is obtained through a mortgage, the title work can be split between two separate title companies.
The title company will conduct a thorough search on the property as well as the buyer and seller of the property to ensure the title is clear of any defects or clouds (such as contractor liens, personal bankruptcies, outstanding taxes, unpaid child support, etc.). Without a clear title, there is not a guarantee that the ownership is valid. It is a big deal. Strange and dangerous things have happened to people who have foregone this crucial step.
One example of this happened recently with a 75-acre lot in Ogden. The sellers sold almost all the land but kept the lot with a home on it. Both buyers and sellers decided to forego the minimal expense of a title company. This resulted in an inaccurate legal description of the property that was actually recorded with the county including the lot with the home on it in the sale. Consequentially, when the sellers decided to sell the home, the property records showed that they were not the owners. This resulted in an expensive disaster that could have all been avoided. Take calculated risks, people, not risks like this.
Along with insuring clear title, a licensed escrow officer with a title company acts as a neutral third party to oversee the final steps of the closing process. This includes drafting final paperwork and documentation, securing proper signatures on all documentation, making sure the property is recorded accurately with the county and overseeing disbursement of funds. As are Realtors, escrow officers are integral and fundamental in any transaction. There is rarely a day that goes by that I am not in direct communication with one.
As for the daring adventure, I highly recommend rock climbing, repelling, spelunking or canyoneering, or perhaps skydiving (if you are willing to opt out of life insurance). But for the love of all that is good and decent, don’t opt out of title insurance for the sell or purchase of one of the largest purchases you will ever make.
Jen Fischer is an associate broker and Realtor. She can be reached at 801-645-2134 or firstname.lastname@example.org.