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Innovation is all around us. It seems like every day, new products and platforms are being developed to change the way we look at virtually every process of our lives. One area where we are seeing rapid transformation is in real estate. Over the last few years, we have reimagined how we find properties, obtain financing, get to the closing table and even move into our new property. When it comes to title insurance, all these new innovative factors will affect how a property is insured in 2020 and beyond.
What exactly is title insurance? As a lifelong title insurance professional, I have heard this question more than any other in my life. Being the third generation of my family in the title insurance business, I was born into a world of deeds, mortgages, title commitments, liens and closings. When I say I have heard this question my whole life, I truly mean my whole life.
Title insurance is a unique form of insurance that protects what in most cases is the largest monetary investment you will ever make in your lifetime: your real estate. Whether you are a homeowner, a small investor or a large commercial landlord, obtaining a title insurance policy when you purchase your property can give you peace of mind that your investment is safe and that if there is a problem, you will not be on your own to fight it.
On average across the nation, title insurance costs roughly 0.5% to 1% of the purchase price when you get a policy protecting you as well as your lender (which is customarily required by the bank). On a $300,000 purchase, that only equates to $3,000 for a policy that will protect you as long as you own the property and your lender as long as they hold the mortgage.
Title insurance is unlike other insurance products such as homeowners, medical or auto insurance. It is a one-time payment as opposed to monthly or annually. It does not protect you from future incidents, but rather from what has already happened in the past. By researching the history of the property and the people selling it to you, the title insurance company knows and corrects any issues that could possibly come up in the future based upon these past events.
If the person who sold you their property was not who they said they were, or if there was a lien on the property that was not satisfied, you are protected. If someone knocks on your door one day and says they inherited and have a claim on the property, you are protected. If a bank tries to foreclose a mortgage from before you bought the property, you are protected. When talking about properties worth tens to hundreds of thousands or even millions of dollars, having that insurance for as long as you own the property can give you a level of comfort that is priceless.
There are myriad problems that might arise when purchasing or owning real estate. Even the most seasoned title insurance professional who could have been in the business for 50 years will tell you that new issues always come up that are unprecedented. There are the legacy issues that they have seen time and again, and then there are the “new” problems that typically crop up from new technology and processes being introduced.
Mortgage fraud and cybercrime are the newest threats to the real estate industry. Hackers have determined that real estate and settlement are an easy target and have moved into the space at an alarming rate. In the last year, remote online notarization and e-closings have gained traction across the country and introduced new sets of problems for the industry, such as proof of identity and security. With a move recently toward automation and machine learning, you gain efficiency, but lose the security of human oversight. With e-recording becoming commonplace and the possibility of recording documents on the blockchain, who does the final review of the documents, and how do they get fixed if recorded incorrectly?
With the advent of new technology and an ever-changing landscape of issues that could arise, title insurance is more of a necessity than ever before. The title industry uses its vast resources to pinpoint the issues and find ways to cure them. A title insurance professional spends countless hours staying on top of the trends and current environment of issues. If any issue comes back to haunt you, a national underwriter will have your back. They will defend you in a court of law or make sure you are made whole. No matter how the industry morphs over time, title insurance will make sure you are protected.
That, to me, is worth its weight in gold.