Is It Necessary to Purchase the Owner's Title Insurance?
Many buyers asked me whether it's necessary to purchase the owner's title insurance, as this is typically offered as an option in the closing documents.
I absolutely consider the owner's title insurance a must for every homeowner as it insures against any risks with unclean title that could come up when reselling the property. It is customary for a real estate attorney to explain the legal technicalities of the title insurance. But to provide a concrete example, I had a personal experience with title insurance a few years ago when I was trying to buy a Cambridge three family building. The owner, who bought this building in the 1990s, didn't purchase the title insurance. A parking easement that was supposed to come with the building had an unclean title, as the neighbor who shared that driveway had sold an easement to the owner for use of the driveway, but the legal language in the easement and deed was somewhat ambiguous. Because the owner didn't buy title insurance, he had to go back to the neighbor that had sold him the driveway easement 30 years ago along with the property and ask them to sign a document to prove the validity of that easement with the deed, but the neighbor refused to sign it. We almost couldn't close on the purchase of the property because almost every title company refused to insure this property along with the easement due to the situation. Fortunately, the attorney I was working with found a title company that would ensure this property along with the easement, and the attorney clarified the legal language by incorporating the easement into the deed. Although in our case the title issue worked out, the owner's choice not to buy title insurance 30 years ago almost cost him a driveway easement that was worth about $30,000 in 2018, and risked his sale of the property falling through -- I wasn't going to buy that property if it didn't come with the legal use of that driveway.