When you purchase a home, many real estate attorneys recommend that you purchase an owner’s title insurance policy. This may seem like an unnecessary added expense. However, one recent story from an attorney demonstrates why owner’s title insurance is vital to have.

This attorney was representing the owner of a building who was selling it. As they approached the closing, they ran into a bump uncovered by the buyer’s attorney. There was an old outstanding utility bill from before the seller had purchased the property 10 years prior. In the municipality where the building was located, unpaid utility bills were treated the same as unpaid real estate taxes. They create a lien on the property that takes priority, even over a mortgage.

Understandably, the seller was furious. He said the utility bill should have been paid prior to the closing when he bought the property. The seller’s current attorney asked him who his attorney was then. The seller said he had relied upon the bank’s attorney. His present attorney explained to him that the bank’s attorney is not the buyer’s attorney. He or she is working only to protect the interests of the bank.

In this case, that bank attorney was probably unfamiliar with the special status the municipality gave to unpaid utility bills. There was title insurance, but it was only a lender’s policy (no surprise there). The seller could have paid a small premium for an owner’s policy, which would have protected him from having to pay the utility bill—plus a hefty amount of interest!—now. He assumed the owner’s title insurance was “just a gimmick” for insurance companies to make more money.

The owner’s title insurance is not a gimmick. Purchasing a home is not like buying an item at the supermarket. You are making a major financial investment. So, protect yourself—and do your research on purchasing an owner’s title insurance policy. Many real estate attorneys advise buyers that owner’s title insurance is indeed a necessary expense.

Here’s more on owner’s title insurance from the U.S. Consumer Financial Protection Bureau (CFPB).


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