query by e-mail: title insurance and sheriff's sale

I received this e-mail this morning and decided to post it because so many readers are thinking about buying property in foreclosure.

Diane,

First, thank you for airing your opinions about title insurance on your weblog "Title Insurance Talk". I've been perusing your articles as part of an effort to give myself a "crash course" in how title insurance works and what I should do in my situation.

If you are unable or uninterested in returning an email, I'll hold no ill-will and leave you with a final "Thanks for the info!" However, if you're kind enough to provide me a couple pearls of wisdom from your experience, I'd greatly appreciate it.

My wife and I are going to a local Sheriff's sale tomorrow to purchase a house that has been foreclosed. (Yes, I might buy my wife a house for Valentine's Day - top that!) I've been emailing back and forth with our newly-acquired real estate attorney, who occasionally urges us to consider getting our title insurance from some company other than the bank's preference. He tells me that he's ok with going with their title company so long as they pay for my owner's policy. But it sounds like banks don't like just "giving away" an owner's policy (go figure). Also, it sounds like banks often state in purchase contracts that they'll "waive fees" associated with title if I choose their preferred company. This attorney also provides title insurance as a service, so he's obviously slightly biased towards going with his own company.

So in essence, it comes down to:
1. Go with bank's title insurance company. (Ask for owner's policy to be included without additional fee.) Upside: easy, maybe cheap. Downside: not sure yet ...
2. Go with attorney's title company. Upside: not sure yet ... Downside: Pay extra bank-based title fees

I know you're in PA, and I'm in Cincinnati, OH, so who knows whether your experience matches with whatever funky state or local laws are in force down here ... but I'd appreciate your read on the situation all the same. Why is it better to go with a title company other than the bank's?

Thanks again Diane!

To which I responded:

Thank you for your kind comments. ;) Setting aside who you purchase your title insurance from for a moment. I am very concerned about your bidding at a sheriff's sale without a title insurance commitment already in hand. Unless your attorney is an experienced title insurance examiner, he may not have been able to find all of those outstanding issues that might impact the insurability of the property being sold. So buyer beware, ok?

As for shopping for a title insurer, the best route is to make some calls yourself. It's okay to talk with your bank's company and your attorney's company, but call some more.

Get full written quotes so you can compare pricing. Then ask these few questions:

1. Who will perform the actual abstract?
2. How many years will they search?
3. Will you get a copy of the title commitment for review prior to closing?

You want an experienced local human abstractor, one who works in THAT county and is thoroughly familiar with local protocol and idiosyncracies.

You want a full search. In PA a full search is 60 years. In Ohio, it might be 50 years.

Yes, you want a copy of the title commitment before you complete your purchase. You and your attorney need to review it to know what you are buying.

Finally, if you can, get a survey. It's the only way to really know where the boundaries sit.

Good luck!