Title Insurance... Is it required?

[JimC]

...what would happen if the title company went out of business...

Dean, are you referring to the title insurance company? Assuming yes, I suspect there are insurer reserve requirements and if the insurer becomes insolvent the company would enter rehabilitation under the supervision of the appropriate insurance regulator.

Insurance mitigates risk, it does not eliminate risk. Just my 2 cents.

 

[Lawshark]

I don't think you addressed the situation of what would happen if the title company went out of business, a larger likelihood than one being able to successfully use the title insurance related to DVC. Basically it's false security for a price.

I think you are misunderstanding how title insurance is actually underwritten...the local title company is the agent for the title underwriter...the actual issuer of the title insurance is a much larger company with all sorts of cash reserve requirements and mucho regulation.

Your question is akin to asking, "Well, you bought your homeowner's insurance from John Smith Insurance...and they wrote it on Progressive Insurance. What if John Smith goes out of business???"

The answer? It won't mean a darn thing. Now...if Progressive goes out of business...

Possible? Sure. Likely? Not at all. If they do go out of business...the assets and responsibilities are going to be assumed by whichever company takes over the company. These title underwriters are usually Fortune 500 companies...publicly traded...and under far stricter requirements than many of the financial institutions that went under in the last few years.

These are not packaged derivative products...they are straight forward insurance policies with set liability.

 

[Lawshark]

It wasn't the price that made me take pause about automatically paying the title insurance... it was the fact that I was told it was required by law. I guess you could call it a "principle of the thing" situation for me. After a bit more investigation, it has come to light that title insurance is not required by law, but is required by the closing company my paperwork was sent to by the realtor. The assistant handling my correspondence told me it was required by law, but later confirmed that it is an internal policy of their particular title company (still required for them to do the closing for me, but not required by LAW). There are companies that will close your DVC sale that do not require title insurance be purchased by the buyer. However, I've decided to proceed with my original closing agent, despite the requirement to purchase the insurance. I just wanted to get a straight (and honest) answer to a straight question.

Thanks for everyone's input.

I suspected that might be the case...they should have been clear with you on why they were requiring it...but I do understand why they require it. The risk if fairly minimal with DVC the way it is set up...but we live in such a litigious time that some inefficiencies are imposed on us.

It stinks...but until we move to lawsuit reform...we're kinda stuck with it.

 

[Dean]

I think you are misunderstanding how title insurance is actually underwritten...the local title company is the agent for the title underwriter...the actual issuer of the title insurance is a much larger company with all sorts of cash reserve requirements and mucho regulation.

Your question is akin to asking, "Well, you bought your homeowner's insurance from John Smith Insurance...and they wrote it on Progressive Insurance. What if John Smith goes out of business???"

The answer? It won't mean a darn thing. Now...if Progressive goes out of business...

Possible? Sure. Likely? Not at all. If they do go out of business...the assets and responsibilities are going to be assumed by whichever company takes over the company. These title underwriters are usually Fortune 500 companies...publicly traded...and under far stricter requirements than many of the financial institutions that went under in the last few years.

These are not packaged derivative products...they are straight forward insurance policies with set liability.

If I understand your answer, it's what I thought, that the insurance is only as good as the underwriter. I'd say progressive going out of business is about as likely as title insurance coming into play with DVC and the assumption that someone else will take over the liability, about the same. I guess my question was whether this came down to the insurer or whether there was an underlying government guarantee, I didn't know. I've been on this board, TUG and others for over 10 years and I don't ever recall a post where anyone even had to contact the title insurer about such matters or even a question of the title on a previously closed property for DVC.

It wasn't the price that made me take pause about automatically paying the title insurance... it was the fact that I was told it was required by law. I guess you could call it a "principle of the thing" situation for me. After a bit more investigation, it has come to light that title insurance is not required by law, but is required by the closing company my paperwork was sent to by the realtor. The assistant handling my correspondence told me it was required by law, but later confirmed that it is an internal policy of their particular title company (still required for them to do the closing for me, but not required by LAW). There are companies that will close your DVC sale that do not require title insurance be purchased by the buyer. However, I've decided to proceed with my original closing agent, despite the requirement to purchase the insurance. I just wanted to get a straight (and honest) answer to a straight question.

Thanks for everyone's input.

Sorry but I read that as dishonesty and an internal policy to pad their pockets. I do not believe one can make the case with timeshares, including DVC, that title insurance is reasonable often enough for it to be a requirement as a question of protection.

Here is a quote from a lawyer touting the use of a full cost closing company and speaking against the lower cost companies.

A basic account and usage research should include contacting the resort and insuring; 1) the seller's own the timeshare, 2) the size and usage of that timeshare, 3) the maintenance fees have been paid, 4) has any of the usage been banked with an exchange company, 5) is there a mortgage on the property, 6) have the taxes been paid and 6) what are the proper steps to transfer ownership. If you are buying a timeshare for $2,500.00 or less you may want to consider this level of closing service which you can get for approximately $400.00. But be careful many companies claim to do an "Estoppel Request" or an "Account Research" but they do not research whether the taxes have been paid. This is one of the most common liens I find when I research properties and you should never buy a timeshare without determining whether the taxes have been paid.

I would suggest that one can easily satisfy ALL of the requirements he speaks of on your own with almost all timeshares and certainly with DVC. The one issue that comes up with many timeshares, which I don't think title insurance actually covers anyway, is when usage is used or disposed of during the process. DVC even gives protection in that area by freezing the account at some point in the process. Here's the Link

 

[LouisianaDisneyFan]

Sorry but I read that as dishonesty and an internal policy to pad their pockets.

I do too... but the cost to start over with another closing company at this point is higher than the cost of the title insurance. I will know to specify a different closing company (one that does not require title insurance) for future purchases of DVC resales.

 

[Dean]

I do too... but the cost to start over with another closing company at this point is higher than the cost of the title insurance. I will know to specify a different closing company (one that does not require title insurance) for future purchases of DVC resales.

It might take extra time but it should take take extra cost to start over. In this situation any expenses should be absorbed by the closing company if you switch.