As a real estate investor, you’re likely spending a lot of money on title policies. Often paying for a policy twice….when you buy, and again when you sell. But, do you know what you’re actually covered for and not covered for? Kevin Tacher gives us a quick lesson in this FlipNerd.com Flip Tip! Watch now!
Mike: Hey, it’s Mike Hambright from FlipNerd.com and we have a quick VIP tip to share with you from Kevin Tacher who is going to share a tip on how you can determine whether you’re really covered with your title insurance policy.
Kevin: Awesome. Thank you. So the number one question is you buy title insurance, you spend all this money and are you truly covered? And the answer is, maybe. Well, what does that mean as you, as the client, the buyer, the seller? “Are you truly covered,” means that there are exclusions to every title insurance policy.
Title insurances is in business to insure property but we’re not in business to pay claims, so the point is that what’s covered and what’s not covered. So look at a title insurance policy to start. A lot of things that are not covered are permitting issues, code enforcement issues, utility bill issues, a lot of other things, or mechanic’s liens.
There are standard exceptions to a policy that if you don’t know to ask your title company to make sure standard exceptions are removed, you could be left with the title claim and nobody to pay it because if it’s an exclusion to the policy, that’s the underwriter’s way out to say, “We’re not covering it.”
The second side is on a lien search. Title companies sometimes order lien searches which check our open permits, expired permits, code enforcement, and utility bills. Expired permits are a big one. If you as an investor are buying property and there’s an expired permit, it’s not covered by title insurance, so if you close with it and now all of a sudden you’re in the position of reselling to an FHA buyer who is going to pull a lien search and find that expired permit, you could be forced to have to reopen the permit, get an engineer’s letter and maybe make major structural changes to a property because work could have been done without a permit or it wasn’t done properly up to the current code.
So you need to know what to look out for. You need to make sure you have an investor-friendly title company that’s looking out for your best interest and make sure they’re not representing someone else in the deal. They want to look out for you. Know what to look for and you’ll be covered.
We’d like to thank our sponsors, RealtyMogul.com and National Real Estate Insurance Group.
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Mike: Please note the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.