Home Buying in Uniondale>Question Details

Rose142, Home Buyer in New York, NY

When buying a reo house all cash from the bank, is title insurance required? Anything else?

Asked by Rose142, New York, NY Mon Dec 27, 2010

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I can't imagine an attorney that would help you buy an REO and not push you to obtain title insurance. In New York State, this is how we protect title, and it's not even a matter of discussion.

But no, title insurance is not required. If you can afford to lose your entire investment and would just shrug it off as one of those things, then you probably don't need title insurance.

If you have followed the news about bank foreclosures, you know that some legal action by previous owners is being contemplated against foreclosures in states that use judicial foreclosure. New York is one of those states. Title insurance would protect your investment against anyone who successfully claims to own the house you just bought. It also offers other protections, but that's beyond the scope of this question.

I also recommend getting a market value rider on your title insurance policy. This will pay you the market value of the house, not just the amount you paid at time of closing. It only costs a little more. That REO is going to need work, and that is going to cost money.

The other thing you should get is landlord's insurance, if this is being purchased as an investment, or homeowner's insurance, if you plan to live there. Landlord's insurance is a great product, I wouldn't buy an investment without also getting a policy.

Karla Harby, VP
Charles Rutenberg Realty
New York City
kharby@crrnyc.com
0 votes Thank Flag Link Wed Dec 29, 2010
Hi Rose -

As you've seen, it's not required but highly recommended. You would not need to purchase lenders title insurance which only lasts the life of a loan but you should get owners title insurance which protects you forever for any claims - your attorney or title company can provide you with quotes and information about what is covered.

A good homeowner's policy not only protects you from loss due to fire or many other hazards but also provides some liability coverage in case someone is injured on your property. This would be critical if you're not going to live in the house. The insurance does NOT protect you against flood damage for the most part.

You may also wish to consider asking your attorney to file a homestead exemption on your new home if it is one that you'll be moving into as a primary residence.

Congratulations on your purchase!
0 votes Thank Flag Link Tue Dec 28, 2010
Hi Rose,

Is life insurance required?

Some states require car insurance, some don't.

Soon we'll all be required to have health insurance of some sort.

Is home owner's insurance required?

The simple answer is no. But you'll need to check with an attorney in NY to find out exactly what the legal ramifications are where you are.

Here's the thing about insurance of any kind. You'll be sorry if you need it and don't have it.

Title insurance does not guarantee you that you won't have any problem. All it does is compensate you monetarily for losses you incur as a result of some title issue down the road. And you need to check the title policy to find out exactly what the coverage is going to do for you.

Jack Jentzen
Prudential Starck Realtors
(224) 234-5276
0 votes Thank Flag Link Tue Dec 28, 2010
Yes best always be cautious and obtain title insurance. We are all human mistakes can happen
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Mon Dec 27, 2010
Yes, even if paying in cash title insurance is highly recommended, protect your investment, as it's probably the best insurance product one can buy--what is your attorney advising......
0 votes Thank Flag Link Mon Dec 27, 2010
Hi Rose, Title insurance should be a must when buying any property, especially when it's a reo, short sale, foreclosure. The orginal owner can come back to make a claim when it's a foreclosure as we've been seeing happen in this market so with insurance your protected. Please seek the advice of your lawyer on this as he is representing you on legal and purchase matters.

All the Best

Dave & Lisa
Web Reference: http://www.urhomerealty.net
0 votes Thank Flag Link Mon Dec 27, 2010
I assume you are having an attorney represent you, as we generally do here in NY. I would ask their advice. I am sure they would never let you buy this home without title insurance, but you can ask. You would want to have title searches done in any case, and will have to file a new deed with the county. In addition, keep in mind that on REO properties you will be paying the NY State transfer tax, which is $4 per thousand.
0 votes Thank Flag Link Mon Dec 27, 2010
Rose142
Lenders require title insurance to protect them (and you) in the case of title problems and and unsettled liens. The same way they want you to have homeowners's insurance to protect against fire and liability issues. If you are buying a property for cash the choice to buy title insurance is entirely up to you. The smart thing to do is to buy it and be protected. REOs, especially, can have title issues. If the bank offers you title insurance with the REO do not get it from them as the policy may have exclusions that do not give complete coverage. Get the policy from a regular title company. Someone I know bought an investment property to rehab and thought he could save money by not getting property and flood insurance (it was in a flood zone but the owners had never had a problem). The rains came and we had the worst flooding in over 25 years. There was much damage and it cost him a lot of money. Be smart, get the title insurance.
0 votes Thank Flag Link Mon Dec 27, 2010
No, it is not required. A lender will require title insurance to protect their investment but if you don't want it you don't have to get it. It is a one time insurance policy that protects you against some things but in your case it is optional.
0 votes Thank Flag Link Mon Dec 27, 2010
Good Morning Rose142
Title insurance is absolutely required for your protection. This protects you against any past liens, taxes, or amounts due on the property prior to your closing.
You should also order a structure inspection of the property followed by a survey of the property. Going forward you will of course need homeowner's insurance.
If you have any questions, please let me know.
Phil
mailto:phil@321property.com
Web Reference: http://www.321property.com
0 votes Thank Flag Link Mon Dec 27, 2010
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