Do You Really Need Title Insurance in Real Estate Investing?

In some countries, title insurance is not available. Title disputes can be settled by court action. Unfortunately, these court proceedings can be lengthy and the results are not always guaranteed. Title security in NJ is an essential part of property transfer. But is it really necessary?

Few properties are mortgaged in countries without title insurance. Buyers must purchase the property with cash or collateral that is greater than the property's value. Cross-collateralization is required in some countries that allow buyers to obtain property loans. This title insurance policy covers the title.

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Ironically, bank-owned REO properties often come with insurable titles that differ from marketable titles. Title defects and deficiencies can sometimes be present that the buyer must assume. These issues are dealt with in the title policy as exemptions or exceptions. They could still exist after title transfer until they have been corrected by the buyer.

This means that an REO buyer may receive an insurable title but not necessarily a marketable one. Non-marketable titles mean that a conventional lender won't likely finance the property because of the title deficiency.

Title insurance is an inexpensive way to protect your property from being sold after the buyer has paid the price and the seller has moved on. Although an investor can conduct title research on his own, it is best to hire a qualified attorney to do the research and issue the title policy. 

The buyer-investor can file a claim against the title company to get his insured amount back if there is a problem with the title after it has been transferred to him. The purchase price is the usual insured amount. If the policy was for more than the purchase price, the insured amount will be higher.