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Tuesday, August 23, 2016

Title Insurance is worth the Money


As a mortgage broker, I often see in the lender’s  conditions sheet a request for the lawyer to obtain title insurance. We all know that this is a measure to protect the lender and to allow for the deal to proceed if there is a delay with the title or the other lawyer.
 However, did you know that title insurance is also available for the new home buyer? Why would you recommend that they spend more money when they have already have to provide a down payment , pay legal fees and moving expenses? It’s the right thing to do.
     Title insurance protects your mortgage client from unknown defaults in the title. This is coming up more and more now that people who bought homes in the 1960’s and 70’s are moving into retirement homes after many years in these homes. You may not realize that in 1973 Mr. Jones made a verbal agreement with his neighbour Mr. Smith to allow his garage roof to straddle the property line. Now the neighbours want you to move the roof over 6 inches to comply with their property survey. Who pays for this? Fortunately, if you have title insurance with either FCT or Stewart Title , they would.
    Another very important reason to consider title insurance even when you own the property free and clear is identity theft.
    There was a very enterprising fraudster operating in southern Alberta a few years ago. He would search land titles for properties in rural areas where the owners had no mortgages or liens. He would then go into a bank posing as the property owner and ask to re-finance the property. If it was worth $500,000, he would ask for $200,000. He would then say that he was going to Arizona for 3 months and wanted to pay his first 3 months on the mortgage up front.
The bank rep would be impressed by the fraudster’s responsible behavior and agree to accept the pre-payment. The fraudster would put a few more deals like this and then leave well before the 3 months was up. The property owner would then be contacted by the bank asking for the late payment in month 4 and would have no idea he had been a victim of fraud. If he was fortunate enough to have title insurance, the insurer would pay for his legal representation and settle the claim with the lender.
  I recommend title insurance to my clients for all the above reasons but by mentioning this to them I am also showing my clients that  I want to protect them. I wonder if the bank would do the same thing for their clients?  For more information on this and other home financing related topics visit my website   
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