Sure would be nice to save a little money buying a rehab property right? Every penny counts! While we can’t argue with you there, it’s important that you pinch pennies where is makes cents—and title insurance is not one of those instances.
Do I Really Need to Purchase Title Insurance?
Recently, we were asked by someone who regularly flips houses if someone really needs title insurance if the bank’s title search come back without issues. Technically speaking, you don’t NEED to get title insurance—just like you don’t need a safety line when rock climbing. You probably won’t slip, but what if you do? Not purchasing title insurance is a serious mistake which could cost you your entire investment.
You may be saving a couple hundred bucks now, but the risk is losing the rehab property you just purchased. Does your business have that kind of money where a loss of hundreds of thousands is worth the risk of a few hundred bucks? Didn’t think so.
Why is Title Insurance Important with Rehabs?
Title insurance protects your investment in the event there was a mistake over the years on the title of the property. Typically, a title search will spot these issues—but sometimes a title search can miss something for a variety of reasons. Here is a post we wrote on some of the problems a title search can miss for more info on why title searches aren’t perfect.
In the cases where a title search misses a major problem with the claim, your title insurance company will step in. With properties which have exchanged hands multiple times over the years, or which were foreclosed on, the chances of an issues with the title increase. If a claim does arise, your title company will work on your behalf to protect your investment. Here are few examples of how title insurance protects your investment if a claim arises.
Save Money on Title When Flipping Homes with Binders
No, not a binder like when you were in school. A title binder, also known as a title commitment, was created with rehabbers in mind, or those who frequently buy and sell their home when moving. A title binder offers the same protections of a normal title insurance policy—but it allows you to pass the title insurance on when re-selling the home. This avoids having to do two title searches so close together, and paying for both of those title searches.
For more information on title services for rehabbers and house flippers get in touch with the title insurance experts at Armour Title Company, today.