Wasting Money on Title Insurance??!! - Posted by Jerry

Posted by Rob FL on February 19, 2001 at 18:27:25:

The Non-Identity Affidavit gets recorded in the public records. The affidavit usually contains the legal description of the property in question, so that everyone knows which property is being dealt with. No quiet title action is necessary.

This is a very common procedure especially when you have a John & Mary Smith or a Jim & Jennifer Jones owning the property. With names like that in some counties you can find 50 or more judgments against the same name.

Wasting Money on Title Insurance??!! - Posted by Jerry

Posted by Jerry on February 18, 2001 at 12:55:27:

Hi all-

When I’ve taken title subject-to in a land trust, I’ve been paying for title insurance. We close at a title Co. providing title insurance: Seller deeds to trust with himself as beneficiary (recorded), he assigns beneficial interest to me(not recorded).

I thought this was protecting my title interest. But if you’ll read the following chain of posts, it seems obvious I’ve been wasting this money! I never stopped to think about it, but it makes sense. DOH!!


So I guess just checking title is all I can do? What do you do? I always wanted the protection, but it sounds like it’s not there! Better I figure it out now that never…grrrrr.

What a great thread! Let’s hear some more… - Posted by Eric C

Posted by Eric C on February 19, 2001 at 13:10:32:

Hi all -

Let’s hear some more from Mr. Goodson, Tim Randle, Nate, Rob FL, and others.

I have to admit that when I first began in this business, I didn’t always get title insurance, and there even was the occasional instance where I didn’t even check the title too closely.

Do I do that now? Never! Well, almost never. I might if I thought the risk level was low enough, but probably not.

I’ve had properties that one title insurance company would refuse to insure, or they would drag their feet until the deal was almost dead, and yet another title company just down the street would have no problems insuring title for the exact same transaction,same property, and same parties.

My take is that title companies are like any other institution made up of people – the level of professionalism, business smarts, and just plain old good common sense varies greatly from company to company.

So, if you don’t find an answer you like, you might want to move on down the street a little bit.

As I get older, I try (key word here is try) to think my deals through more carefully. While accomodating change is always vital, starting over from scratch is not a skill I wish to hone any further.

Title insurance, asset protection strategies, and other “details” become more and more important as your wealth increases. Duh…

Here in Dallas some years ago(1995?), they had a fellow who had sold about 65 properties (carrying the financing on all)who ended up having ALL of them unravel before his eyes and on the front page of the Dallas Morning News. He made some mistakes. Simple mistakes. Costly mistakes.

Starting over for him was no longer optional.

I acknowledge that there is a great deal of expertise here regarding title companies, title insurance, etc. All of these folks have valid points of view.

For me, I’ll probably just keep doing what I’m doing until someone convinces me otherwise. I’m not opposed to changing my mind, it’s just that I haven’t heard a really convincing argument yet. In any case, I have to take responsibility for myself. I’ve seen too much “squirrely” paperwork over the years. Some of it is “homemade”, some of it is institutional, and some of it is just plain fraud. (I’d much rather do without fire insurance than title insurance in most cases)

Speaking of less than ethical behavior, a neighbor of mine owned a large title company for many, many years. He’s now 90 years old and I’ve always marveled that he didn’t get shot. In his younger days, he was famous for coming up with “new paperwork” whenever the mood (and cash) struck him. His son was later indicted on Federal fraud charges but even large oil companies learned the hard way not to deal with this firm. Think you’d have a chance?

But enough war stories from me. Let’s hear some more about the title issues. I already know what I’m going to do and why. Other will (and should) take the same facts and yet come to different conclusions. That’s OK.

More, more…


Eric C

PS - Tim, if you buy me a beer one of these days, I’ll tell you how a local title company (your area) cost me a major deal. You could even title it “How I didn’t make a million dollars in one day!” Take care.

Re: Wasting Money on Title Insurance??!! - Posted by Rob FL

Posted by Rob FL on February 18, 2001 at 16:42:38:

The title insurance is definitely there and definitely worthwhile. It protects the title from any defect ocurring prior to the recording of the deed into the trust. The beneficaries of the trust could make a claim against the policy if necessary. This is very similar to a corporation taking title to property and then someone buying 100% of the corporate stock. The corporation can still make a claim on the policy.

There are Pro and Cons… - Posted by David Krulac

Posted by David Krulac on February 18, 2001 at 14:55:38:

I have bought without title search before, but I would not recommend this to everybody. I have three stories:

  1. A buyer bought a place that had a fire about 30 years ago. It was suspected arson and there was a problem with the insurance company paying off the mortgage. The buyer bought without title insurance, and everything was fine until the buyer went to sell and couldn’t without paying off a 30 year old mortgage.
    A lawyer was hired and the state limitation is a mortgage is presumed good until the final payment was due plus 21 years. So a 30 year mortgage is presumed paid off after 51 years.
  2. A buyer bought a nice cape cod house in the country on 1 acre for a bargain price you had to act
    quickly. He searched the deed office for mortgages and found none. It was late Friday afternoon and he couldn’t search judgements before they closed. He bought the property for cash Saturday morning. Monday morning he discovered a lawsuit, a lein and a judgement.
  3. A relative of mine bought a property in 1919 with the intention of building. A title search reveled no leins in 1919. No title insurance was gotten. The property was owned for 50 years and no mortgages, judgements or leins were placed on the property. When they went to sell a title search revealed an unpaud tax bill from 1913! No state limitations on tax bills. The good news is that the initial tax bill was small, the bad news is that it was accumulating interest and penalties for 56 years and had to be paid before the property could be transferrred.
    In all three cases title insurance would have helped, or the inability to get title insurance would have prevented or at least given the initial buyer pause.
    David Krulac

perhaps over the net? - Posted by TRandle

Posted by TRandle on February 19, 2001 at 22:29:58:

The beer offer has been a standing invitation for what; going on a year now? Guess I’ll have to order one over the net and have it delivered personally. LOL! I’d like to hear that story and others so ring me on your next visit.

Re: I Just want the Truth - Posted by Jerry

Posted by Jerry on February 18, 2001 at 22:04:10:

I’m re-posting a reply from JGoodsen, from below, so we can all see what we’re discussing under one thread. I’m not a title insurance expert, obviously. I can follow a chain of title, but I pay others to be my experts. That’s only smart. Who has time to become a mortgage expert, a title ins expert, a legal expert, etc. So, now I’m asking those who know, “should I buy title insurance on my subjet-to/land trust deals?”

Here’s the prior post from JGoodsen.

I’d like you to go ahead and spell out where the risk is? Those are serious allegations you are leveling, and in a condescending tone to boot.

I’ll ask you again since you didn’t answer. What are you expecting in return for you title insurance premium? I don’t think you are getting what you are thinking you are getting.

Mr. Krulac is talking about full title transfers. I’d never take title without full title insurance and compete due diligence. In that instance you do have risk, and no carry-forward of the previous title policy. I am also in fact not encouraging anyone to purchase ‘subject to’ via land trust without reviewing title information. That would be ludicrous. The difference here is in reviewing the title information personally, and purchasing title insurance asserting the information they are providing is correct. Additionally, none of the scenarios Krulac mentioned are possible if you do your due diligence in a ‘subject to’ land trust takeover.

Rob from FL simply doesn’t understand land trusts in my humble opinion. The grantor in the trust’s title insurance is still in place to protect against previous defects in title. What it doesn’t cover is attachments since the current owners took title to the property, and anything unrecorded floating out there in the ether. The first will show on your preliminary title report. The later taken care of assuming you are smart enough to hold your land trust interest with at least two beneficiaries since those maladies couldn’t attach to the property under that arrangement. Again, your new title insurance is only building on the title insurance purchased when they initially took title. Rob again affirms what you are really covering is the period between when you run your preliminary and when the deed is recorded, and that the title company assumes liability for truthful accounting of all recorded liens, suits and judgments in case you can’t read. If you feel that protection for a day to a couple of weeks is worth the premium then pony up. I’d tell you that is far less a gamble than most of the strategies offered up around here when considering what can go wrong with a transaction.

Re: Wasting Money on Title Insurance??!! - Posted by TRandle

Posted by TRandle on February 18, 2001 at 20:53:07:

I know you have the background in this, so please help me understand. So far, we have purchased title policies on all our buy-side transactions, except the most recent one, which we’re debating.

If there are no liens attached to the property other than the lender’s 1st and the property is placed into a trust titled “123 Main Street”, how can anything else attach? I don’t understand why the sellers have to sign off on “Not Me” (sorry, forgot the name) affidavits stating this person with a similar name who has federal tax liens is not my seller.

If there is nothing else attached to the property, how does having a seller with a common name somehow affect the chain of title? Something is either attached or not, so I don’t get these “floating” tax lien issues. Can you please explain to a layman? Thanks…

Re: perhaps over the net? Nah… - Posted by Eric C

Posted by Eric C on February 21, 2001 at 10:50:35:

Hi Tim -

Would you believe I actually got together with David Alexander yesterday – in person!

Although, I promised him a good meal (and some alcohol), we settled for a Denny’s out by DFW airport. It seemed like we were both more interested in talking “RE” than in eating anyway.

Trust me, I’ll get down your way soon. Promise.

See you,

Eric C

Re: I Just want the Truth - Posted by Rob FL

Posted by Rob FL on February 19, 2001 at 08:23:50:

From the post, it sounds like JGoodsen is talking about a PACTrust which is a slightly different scenario than the land trust/assignment of beneficial interest that Bill Bronchick describes in some of his articles. I believe what JGoodsen is trying to say is that title insurance is only good to protect you for things that occur prior to the deed being recorded. Any problems with the PACTrust after the deed is recorded will not be covered by the policy.

For me personally, this is my take on title insurance. And let me say that I have been in the title insurance business for about 11 years now and understand how to correct title problems if necessary. After ordering a title search or performing my own title search, if I review the report and the title is clean, then I only buy title insurance if the seller is paying. If I have to pay, I usually don’t bother with it. However, you need to do what makes you feel comfortable. I have lots of title experience, most people don’t.

Re: Wasting Money on Title Insurance??!! - Posted by Nate

Posted by Nate on February 18, 2001 at 21:44:08:

If you don’t at least do a title search, you can’t be sure there aren’t any other liens. That would be bad.

If you do a title search but don’t buy title insurance, and you don’t think there are any other liens, and you turn out to be wrong, that would also be bad.

Unless you are a good enough title searcher to do your own work, and are willing to stake everything you own on it, just buy title insurance already!

With all due respect, Rob FL - Posted by JGoodsen

Posted by JGoodsen on February 19, 2001 at 10:53:03:

I think you still don’t get it in spite of having lots of title experience. This has nothing to do with some trademarked method that Bill Gatten promotes that happens to be an amalgamation of some really good ideas, most of which revolve around the use of the land trust and therefore contribute to the confusion here. I apologize for doing this, but I am heading out the door right now as commerce calls. I do promise to continue this discussion in full this evening if you are amenable. I have a feeling this is going to take some time to type.

I’ve got some ideas for TRandle as well.

Let Me Be Clearer… - Posted by TRandle

Posted by TRandle on February 18, 2001 at 22:54:48:

If the extent of your knowledge related to title policies is “just buy title insurance already!”, then you needn’t read any further. However, If you are able to answer my original questions, I would be grateful for your input.

We did a title search and wouldn’t consider purchasing a property without one. In fact, as I’ve already mentioned, this is the only deal in which we have not purchased a policy. In this particular deal, we closed approximately 20 hours after first contact so there was no time for the title company to get a policy done.

These sellers have common names and the title company’s search came up with numerous similar names related to federal tax issues. In order to get a policy issued, I will have to track down the sellers who are separated and living in separate towns and get them to sign notarized documents. Whether or not I decide to do this does not change my desire to understand the issues.

So again, my question is related to the “floating” tax issues. I don’t understand how the tax issues are a problem AFTER a property has been placed into a land trust. I don’t understand why the title company will not issue a policy until after the sellers have signed off on the Same Name Affidavits, or whatever they’re called.

To quote Barron’s Dictionary of Real Estate Terms, a Lien is “a charge against property making it security for the payment of a debt, judgment, mortgage, or taxes.” Therefore, any debt, judgment, or mortgage which has not been attached to the property in question prior to transfering title to a trust, thus becoming a lien, would have an extremely low probability of attaching after the property is titled in a generic land trust.

So, what I’m looking for (in case it’s still not clear) is for someone to explain in simple terms how the unattached tax issues affect the title chain. I don’t want to have difficulty years from now trying to provide my ultimate buyers with a title policy simply because I didn’t get these sellers to sign off on the required documents. Thanks in advance for the responses.

Re: Hello…anyone there? - Posted by Jerry

Posted by Jerry on February 20, 2001 at 10:46:37:

We’re waiting for your information…

I’m ready… - Posted by TRandle

Posted by TRandle on February 19, 2001 at 22:34:47:

I look forward to whatever information you have to share. This topic seems to be similar to insurance on subject to deals, where many have what they think is a better way, but no one is too sure. If I can have minimal risk in passing clear title later without shelling out $1,000 to $1,500 on my subject to deals, I’d certainly like to know how. Thanks…

Re: With all due respect, Rob FL - Posted by Rob FL

Posted by Rob FL on February 19, 2001 at 11:37:17:

I look forward to hearing from you. In all honesty, I was a little confused by your posts. It might be good to give some specific examples so that we can all learn something.

I had a similar situation… - Posted by osirus

Posted by osirus on February 19, 2001 at 12:13:16:

I had a title search done on a property. It revealed that the owner owed thousands of dollars in IRS tax liens. As it turned out it was the owners son with the same name that owed all the money to Uncle Sam. The title company cought their mistake when they compared SSN’s

Re: Let Me Be Clearer… - Posted by Nate

Posted by Nate on February 19, 2001 at 08:50:26:


Apologies for the cranky message. It was late, I was tired, and I actually hadn’t even read your original question…

Not one of my better posts.

Anyway, to answer the question you posed here, I think Rob FL does a fairly good explanation below. I’d also like to add that I do not follow your logic in asserting that, because the property is in a trust, a lien could not be attached due to tax issues affecting the grantor. Otherwise, anyone facing tax problems would simply put all their property in a trust and it would be untouchable. The transfer into a trust is a nonissue as far as whether or not a lien gets filed.


Re: Let Me Be Clearer… - Posted by Rob FL

Posted by Rob FL on February 19, 2001 at 08:34:44:

The “Same Name Affidavit” or “Non-Identity Affidavit” is used when someone owns real property and someone with a similar name has judgments or tax liens filed against them. If the property owners and the debtors on those judgments/liens are not the same person, then you are correct, no lien has actually attached to the property’s title. The need for the “Non Identity Affidavit” occurs because the title company does not know if these are the same person or not.

Someone with knowledge (it’s actually best if it is not the property owner since there could be a conflict of interest) needs to sign the affidavit saying that I have verified that the person on these judgments/liens is not the same person as the owner of the property. Therefore the liens never attached to the property.

Does that help?

sort of… - Posted by TRandle

Posted by TRandle on February 19, 2001 at 10:34:22:

So these tax judgments are semi-attached? In other words, it’s not as black and white as I was painting it in that something is either attached or not? So, a title search reveals these items that ARE attached and these items that MAY be attached? And in order to issue a clear title policy, the “potential” liens must be addressed and satisfied?

So, land trust or not, if I want to be SURE I can pass clear title down the road without having to track down the folks who sold it to me, I have to get a policy when I buy rather than just an abstract? That adds an element of risk to quick deals that I wish were not there. I was just wondering whether or not I was spending my funds unwisely by actually purchasing a title policy on every type of deal. Thanks…