WHY DO BUYERS NEED AN OWNER'S POLICY AS OPPOSED TO JUST THE POLICY THE LENDER HAS REQUIRED...
If your property were purchased for $100,000.00 the premium for the Lender's (only) Policy would be $714.75 (basic rate) and the Owner's and Lender's Policy combination premium would be $833.75 (basic rate). Therefore, for an additional $119.00 you get an Owner's Policy that protects your ownership interest. In addition, should you die, the ownership interests of your heirs or devisees are also protected under this same policy. You pay a premium only once and the policy continues in force until you sell to a third party. Don't let anyone convince you that the Lender's Policy accures to your benefit. IT DOES NOT.
A Lender's Title Policy insures only the Lender. The Lender's Policy insures that the mortgage is first lien. The Lender, of course, would be concerned if they found out there is a judgment or municipal liens a head of their mortgage in lien priority; but only when the mortgage is in foreclosure. The Lender gets concerned once the tragedy has already happened. An Owner is concerned before it gets that far. And, without an Owner's Title Policy, you are not covered and you could end up paying someone else's debt.
A Lender's Title Policy is an indemnity contract for losses, the Lender must suffer a loss before they actually have a claim under this policy. Therefore, they must proceed to foreclosure, sell the property and obtain less than the debt due on the loan.
Mr. Seller and (presumably) Mrs. Seller arrived at settlement to execute the deed to Mr. & Mrs. Buyer. A while later, the real Mrs. Seller's Attorney mails a letter to Mr. & Mrs. Buyer claiming the property still belongs to Mrs. Seller, who had been separated at time of the purported sale and unaware of the deliberate treachery of Mr. Seller.
When you purchased your property, the settlement agent paid off the Seller's mortgages. You thought your troubles were over. Later when you went to refinance your mortgage for a lower rate, the settlement agent finds old open mortgages still against your property. The settlement agent had obtained a letter of indemnification from the Seller's title insurance underwriter (because the Seller had an Owner's Policy) in order to insure over these old mortgages. Later the settlement agent failed, for whatever reason, to obtain releases from the mortgage companies to clear the courthouse records. If you did not have an Owner's Title Policy insuring you against such liens, you cannot refinance because the title company cannot insure your new Lender a first lien position and you cannot obtain a letter indemnification, as did the Seller when you purchased, because you did not purchase an Owner's Title Policy to protect yourself.
However, you were advised by a trusted and competent Advisor that you do not need an Owner's Title Policy. "Once they search the title to protect the Lender, you know your title is good. So why pay the extra money for an Owner's Title Policy." Good Advice? Not when that claim comes in.
Your legal description recites a boundary along a roadway. The Seller says he uses the dirt roadway to get out to the main road. The settlement agent just assumes there is legal access to a public road because of the way the legal description reads. When the property owner over which you must travel to reach the main highway sells, the new owner decides to block off this dirt road. Now you are LANDLOCKED. You may or may not be able to require this neighbor to open the roadway again without purchasing an easement from him, but you have to go to court and pay a lawyer and the court expenses. NOT IF YOU HAD AN OWNER'S TITLE POLICY.
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