Is Title Insurance required for a private sale of a home?

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We are refinancing our home (Long Island , New York) and and open permit showed up on the title from 60 years ago! This never came up when my parents bought the house in 1977, but it was a private sale. It also never came up in 2001 when the home was transferred over to me. I should also mention that we used the same lawyer for both transactions. I am wondering if title insurance is only required by mortgage banks or if it a legal requirement for any sale of a home.

Thanks!

7 Comments
  1. Reply
    LoneRanger
    June 26, 2011 at 7:00 am

    Title insurance is not a legal requirement of any sale, but as you mentioned a requirement of most lenders.

    Also, if your attorney missed a title flaw, they should be responsible for the error. That’s why they have insurance.

  2. Reply
    Landlord
    June 26, 2011 at 7:49 am

    Title insurance is never required. I always get it, I have had to use it and it is dirt cheap.

    However, this will now come up in any title search, which lenders will require.

    You need to get it taken care of. It is just a permit, not a big deal. Whatever was built only has to pass an inspection by the code when it was issued.

  3. Reply
    acermill
    June 26, 2011 at 8:21 am

    It is not any sort of legal requirement, but is always a requirement by lenders (as well as by savvy buyers). Title insurance is there to handle exactly what you are experiencing right now. Were there title insurance involved, the issue would have been handled either at time of your purchase, or right now. You can probably handle this situation on your own, or with an attorney’s assistance, but it could be tedious and time consuming.

  4. Reply
    Alterfemego
    June 26, 2011 at 8:29 am

    There is a form of title insurance that the buyer pays for at closing for the lender. There is also a tile insurance the buyer can purchase for themselves that would protect your rights should there be a cloud on the title and it need to be cleared.

  5. Reply
    BoomChikkaBoom
    June 26, 2011 at 9:10 am

    There is no lender in the state of New York that would not require both a full title search AND a loan policy. If you have a private sale with no mortgage, it’s optional but unless the property is only worth 5,000 or some ridiculously low amount, I can’t even imagine that a buyer wouldn’t go for a search and an owners policy. There is too much at risk.

    The attorney is not responsible for the open permit issue. The title company is the one who would have either missed it or issued an exception. In New York, a title officer is present at closing and they “mark up” the commitment to deal with open matters. Unless the attorney assumed the responsibility of clearing title, and I really doubt they did, it’s the new owners problem if they don’t have a title company to handle it.

  6. Reply
    apropos92
    June 26, 2011 at 9:21 am

    Title insurance is legally required in only a few states, New York not being one of them. Your attorney is responsible for clearing your title, only if it is stipulated in your contract. If he was only responsible for drawing up the documentation for the sale, he has no responsibility to you. However, it won’t hurt to ask him to take a look at the issue, and see if he might offer a solution to you. As I said, he is under no legal obligation to fix anything unless doing so is stipulated in your contract.

    Now, you can purchase title insurance after the fact. I would recommend you find a reputable title agency near you, tell them what the issue is, and ask them to clear your title. Since this issue was just recently discovered, it is possible that you have other clouds on title. Ask your title agency to complete a title search and to clear title for you. If there are no major clouds, this should only cost a few hundred dollars. Insuring after wards is up to you, though strongly recommended to avoid future issues.

    Before you have the agency do anything, ask what the laws for New York are in regards to permits. In Florida, most clouds expire after 30 or 45 years depending on the issue, however, some permits, especially those associated with local, state or federal agencies, can remain for up to 150 years. A sixty year old permit may have just expired, if that is the case, title should be clear. You should still buy title insurance, but it won’t be necessary if you have clear title.

  7. Reply
    Pei
    June 26, 2011 at 9:33 am

    homeinsurance.awardspace.us – try this one. Got my home insurance from them. As I know they provide such a service.

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