Why Owner's Title Insurance Is Required On A Cash Deal

Understanding Title Insurance:

Title insurance protects property buyers and mortgage lenders against defects or problems with a title when there is a transfer of property ownership. There are two types of title insurance: lender's title insurance, which protects the lender's interest in the property, and owner's title insurance, which protects the buyer's interest.

The importance of title insurance cannot be overstated when purchasing real estate through financing or cash. Trust us - we've seen the potential side effects of skipping out!  Check out some of the all-time wildest title defects we've seen here. At Cohen Closing & Title, we emphasize the necessity of owner's title insurance, especially in cash transactions. In fact, at Cohen Closing, it is mandatory on cash transactions.

Why Owner's Title Insurance is Mandatory in Cash Deals:

In a financed purchase, the lender requires a title insurance policy to protect its investment. This makes the owner's title insurance optional but highly recommended. Fun fact:  at Cohen Closing, we have less than a handful of financed buyers who choose to waive their owner's policy each year. However, in a cash deal, there is no lender to need a policy.  And as a title company, it is considered the unauthorized practice of law to transfer a property without any form of title insurance.  Which is why it's our requirement that all cash buyers must purchase an owner's title insurance policy.

The Risks Without Title Insurance:

1. Hidden Title Issues: A thorough title search is conducted for every property transaction. However, some issues, such as forgery or erroneous recordings, may not be detected. For example, if a previous owner fraudulently discharged a mortgage, it wouldn't be apparent through a title search, but that lender would still have an interest in the property.

2. Financial Security: Owner's title insurance is a one-time fee that covers most title-related issues. If a problem arises, you simply file a claim without incurring further out-of-pocket expenses. This provides peace of mind and financial security.

Customary Costs and Coverage Options:

Typically, the cost of title insurance is borne by the buyer. We offer two types of owner's title insurance policies: the Homeowner’s Policy and the Standard Owner’s Policy. The Homeowner’s Policy provides expanded coverage, while the Standard Policy offers basic protection at a slightly lower cost. If you're curious, reach out to your processing team at Cohen so we can provide detailed documents outlining what each policy covers and what it does not, to help you make an informed decision.