Title insurance and survey needed in buying house?

SouthEastOhioAugust 7, 2012

My wife and I plan to purchase a house and want to know if we should get title insurance and a physical survey of the property.

This is a townhouse built in 1985 in a retirement community, located in a populous and affluent county with strong real estate regulations. The development is on land that was owned by the Catholic Church. The community has had a strong and active HOA since it began.

We are paying cash for the house. There will be no mortgage.

The previous owner passed away last November and we are buying it from her son who is the executor of the estate. The townhouse has had only two previous owners, so this will be the third purchase of the developed property.

The attorney representing us at the closing strongly advises us to get both title insurance (cost about $850) and a physical survey (cost ?). We do not believe either of these is necessary.

Any comments or advice on this will be greatly appreciated.

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    Bookmark   August 7, 2012 at 7:07PM
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Title insurance: definitely. It protects your interest in case the title's not clean or problems are discovered later.

Survey: I don't get why this would be important, especially in a townhouse where you don't own the land.

    Bookmark   August 7, 2012 at 10:28PM
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Also, your attorney strongly advises you to purchase title insurance, but you decided to ask a bunch of strangers on the internet if it is necessary? I'm assuming that you are spending a fair bit of your money on this purchase. Get title insurance.

    Bookmark   August 7, 2012 at 11:12PM
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Yes, to both.
And townhomes do own the land, and perhaps a small portion around, under their home. The townhome I sold in MD was an end unit so included double the amount of property as all the other townhomes. The common areas were beyond the private areas.

    Bookmark   August 8, 2012 at 9:49AM
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"Survey: I don't get why this would be important, especially in a townhouse where you don't own the land. "

Depending on how the deed is written you may on some section of land, often at least the land under the unit and in many places a front yard to the street and a back yard to some line.

If is is titled as a condo you may not won anything but the interior.

Title insurance pays if 'sonny boy' decides to change his mind, or if ANY defect in the chain of tile of found at a later time (like a forged signature or someone who was not legally capable of conveying title).

Get the owner's policy WITH inflation coverage.

    Bookmark   August 8, 2012 at 10:58AM
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The two people I know who did not get the title insured/investigated lived to regret it.

The neighbor to my brother's 1940s house has a right-of-way through a corner of their back yard so he can get his big motorhome onto his property. Result was a jog in their fence and some nasty exchanges over said fence. The house is now one of DB's rentals.

My husband's brother bought 5 acres on the coast next to a golf course, which, as it turns out, has a right-of-way through the middle of the acreage. Result was to abandon the plans for the dream home, and pretty much the property as well. I don't think it ever sold.

The point is that you never know what you may find. That $850 is pretty cheap insurance.

    Bookmark   August 8, 2012 at 11:32AM
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Yes I would get them if it was me. In fact in the house we recently bought without a mortgage, we got both. I wouldn't be penny wise and pound foolish.

    Bookmark   August 8, 2012 at 11:50AM
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Land that was once owned by the church, and was developed in 1985 - that is a pretty safe bet that there are no issues with the lots. The church is not going to sell the developer land they do not own, and the developer is not going to buy any land that had an issue. I would say title insurance is not needed. Same goes with the property survey. Most of the time with townhouses, the lot lines are not very hard to figure out.

To me, a title lawyer who is in the business of recommending title insurance and boundary surveys is similar to a car dealer who sells rust-proofing and extended warranties. Sure, the lawyer is not going to be getting the insurance premium, or the fees associated with the boundary survey, but if he successfully recommends someone to you, I wouldn't doubt that he gets a kickback for that.

I work for a land surveying company, and we had a client who had lived on a property for a long time. This parcel of land used to be part of a 400 acre farm dating back to the late 1700's, and over the years, the lot got chopped up into much smaller lots. So the neighboring lot sold, and the buyer had a boundary survey done. Upon doing the deed research, it was determined that a survey done in the 1930's was in error, and they held the wrong property corner. This meant that our client's paved driveway was on the new buyer's property. The new guy could have been nice about it, and just sold our client an access easement, but he didn't legally have to, so he didn't. Our client had to pay to rip up the old driveway that was encroaching, put sod down in that area, and relocate his driveway. This required removal of a lot of trees, and a lot of additional grading. I don't know what his total bill was, but I would estimate it was at least $20k. Our client actually had title insurance, so he wasn't worried - until he actually contacted the insurance company. They told him that this issue wasn't present when he purchased the house, that they were not responsible, and it was his problem. So this guy paid for title insurance, which should have protected him, and it didn't. All the guys in my office said that title insurance is a joke - not worth the paper it is written on.

    Bookmark   August 8, 2012 at 1:52PM
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We bought a half of a duplex townhouse a few years ago in a development with a fairly strong and active HOA. We bought from the original owners of the townhouse. Since we were paying cash and the unit was in a development we decided that it'd be a waste of money to get a survey, however I think we did get an owner's title insurance policy.

A few years later when were selling, the buyers were required to get a survey as one of the usual conditions for a mortgage. The survey results came in three days before closing and showed that not only was the shed the previous owners built not completely within the setback requirements, it actually jutted over the property line into the common area by about two feet. Additionally a corner of the ground level deck jutted into a 20' wide sewer easement traversing the back yard.

The buyers demanded that we demolish the shed, and have new one built within the bounds of the setback, as well as removing the corner of the deck that was encroaching on the easement. We countered that pursuant to the contract we would offer $1000 in lieu of correcting the defect to the title, which they were free to accept, or walk away clean.

Since at the time of closing, their moving truck was sitting in front of the property and they had nowhere to stay, I felt sure that they'd accept the counter offer, but I was still honked off that it was necessary.

Several years later, after they sold the property, I was visiting the neighbors, and the "problematic" shed was still in exactly the same location. I don't know if/how they resolved the issue.

    Bookmark   August 8, 2012 at 3:58PM
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Title insurance yes!
Survey no. Depending on the legal description, an ILC (Improvement Location Certificate) might be sufficient, which will identify the property markers and any encroachments.

    Bookmark   August 8, 2012 at 4:06PM
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Also during the day or so between receiving notice of the survey results and the closing, we contacted the title insurance company to try to collect based on the title defect caused by the shed encroaching into the common space. Their response was that since it was something that would have been shown by a survey and we decided not to get one, they were not responsible, and it was our problem.

It really makes me wonder if anyone anywhere has ever collected anything from a owner's title insurance policy, or are the policies so much written in the favor of the title insurance companies that they're always able to point to some fine print and say "We're not responsible, it's your problem."

    Bookmark   August 8, 2012 at 4:07PM
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"Their response was that since it was something that would have been shown by a survey and we decided not to get one, they were not responsible, and it was our problem. "

So you did not have a survey performed and expect someone else to pay?

Get real.

As for "Land that was once owned by the church, and was developed in 1985 - that is a pretty safe bet that there are no issues with the lots." you are fine right up until a problem arises.

Then you get to foot the bill to have ANY mistakes fixed, and pursue the previous owner that gave you bad title. Good luck even finding them, let lone collecting anything.

Are you SURE any easements the church granted have been extinguished and no new ones established?

The IRS is not going after the place?

    Bookmark   August 8, 2012 at 4:27PM
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