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Old January 3, 2007, 01:50 AM   #1
jowalton
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Title Insurance

Can someone tell me what is title insurance, how much it is likely to cost , what it would cover me for and how necessary it would be as part of a resale purchase ?

thank you

jo
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Old January 3, 2007, 08:49 AM   #2
Dave M
 
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Title insurance provides you with a safety net in case your title, after you become the owner, is in some way defective. As examples, a lender who financed the previous owner's purchase might assert that there is a mortgage against the timeshare and threaten to foreclose on the timeshare unless you pay off the debt. Or it turns out that the seller wasn't the legal owner or didn't have the right to sell to you because of divorce complications, unrecorded deed transfers or other issues.

If one of those bad things happens, you could lose your ownership. If that happens, the title insurance company will pay you whatever your damages are or the amount of the policy, whichever is less.

Obtaining such insurance is automatic when buying a home where a lender is involved. The lender will insist that you purchase such insurance so that the lender's rights to foreclose are protected. As an owner, you would want the insurance because loss of your home due to a defective title would likely be a staggering financial hit for you.

There are some different factors in play with a timeshare. First, the amount you will invest in a resale is nominal compared to the purchase of a home. It would be rare that the loss of the timeshare would be a severe financial loss. Second, many of the defective title issues that exist with homes are not present with timeshares. For example, most timeshare loans are written as consumer loans rather than mortgages and the lender rarely has the right to foreclose. There might be outstanding maintenance fees that could cause a problem, but....

It's much easier with a timeshare than with a home for you to do the due diligence to minimize the risks of a defective title by contacting the resort/developer and asking questions and/or requesting estoppel information. That's particularly true if you can determine that the seller purchased directly from the developer, meaning that there has likely been only a single owner prior to your purchase. (You might need written authorization from the seller for the resort/developer to be willing to give you info.) See this TUG Timeshare Purchaser's Checklist for info on questions - including many questions unrelated to title issues - that you might want to ask before making a purchase.

No one has ever reported here of losing a timeshare due to a defective title. Can it happen? Sure? Does it happen? Not very often.

For those reasons, very few TUGgers purchase title insurance.

If you decide to get title insurance, expect to pay $250-$500 or so, depending on the state and the purchase price.
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Old January 3, 2007, 09:28 AM   #3
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I do agree 100% with Dave and wanted to add an important point.

Title insurance has two components. First is the actual title seach, second is the insurance component that protects you ONLY from things not discovered during the search.

During the title search, the deed records, tax records, lien filings will all be investigated and a report of them created. If something is found, it is your job to correct it (or get seller to correct it) or you can choose to walk away from the deal (so long as your sales contract is worded properly to give you that important right as buyer).

This is the protection you really want. The odds of the title search missing something are slim, that's why the insurance component is so profitable for the issuers. The insurance only covers them taking care of anything they accidentally missed in doing the title search.

If you are spending more that $10,000, and do not want to be bothered checking with the resort, county tax and county records folks, it is sometimes worthwhile to just get the title search part of the process done. Usually will cost from $125 - $200 to do. Keep in mind that, while fairly rare, things can exist which the seller is unaware of, particularly if the timeshare was part of an estate or divorce - these increase small risk by a little bit.

Look in the yellow pages for the area of the resort. The people who do the title searchers will all be listed under "abstract companies". They are the same ones the title companies use to subcontract the local title searching work and will do a title search directly for you.

For the great majority of resale timeshares it's not worth the expense of even a search. Dave is right, title defects and liens are extremely rare in timeshares. But never discuss odds with the lucky SOB who defies the millions-to-one odds and gets hit by lightning.
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Old January 3, 2007, 09:35 AM   #4
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Ahhh! Nice additions, John!
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Old January 3, 2007, 10:27 AM   #5
wackymother
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What if the seller is guaranteeing clear title in the contract to buy? Is that useful in any way?
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Old January 3, 2007, 10:45 AM   #6
johnmfaeth
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Hi W-Mother,

First, didn't know how to address you, may not be polite to refer to you as wacky.

The seller's declaration to defend the title is present and the definition of a "Warranty Deed". The problem is that you may have to go to court to force the seller to perform his obligation and then hope that the seller has the financial resources to do so. This can be very costly (in the thousands) and time consuming. Again, the limited economics of timeshares make such actions inefficient unless a really expensive unit (aka Ritz Carleton).

Because of this, title insurance came about for all forms of real estate. It is a relatively new concept, just about 50 years old.

I have a poor knowledge of Canadian Law but was surprised to recently learn that they do not have title insurance and still use the old warranty deed methods only. Someone please correct me if I am missing something.

The reality of today's court "conditions" sort of invalidate (in practical terms - for timeshares) some of the "I will only take Warranty Deed statements" that are sometimes seen in this group IMHO.

John
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Old January 3, 2007, 10:51 AM   #7
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I don't believe such a guarantee would be very useful.

Suppose the seller's guarantee turns out to be invalid. Then what? If the seller says, "too bad", you can sue the seller, but the thousands of $$ you might have to pay for attorneys and court costs would be huge compared to the small payment you could have paid for title insurance with a reputable company. And from a practical standpoint, you might have to sue in the seller's home state in order to stand a reasonable chance of collecting a judgment. So add loss of your personal time and travel expenses.

I'll either pay for title insurance or do my own due diligence so that I can sleep at night!
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Old January 3, 2007, 11:09 AM   #8
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It's hard to know what to do in my situation. I'm buying a ts off eBay at a good price, not a ton of money but enough to hurt if I were to lose it, and I really want the ts. From what I can gather, it was most recently sold by adult children who bought the t/s a few years ago from the estate of their parents. But they are not the sellers now, it's an eBay timeshare group. The resort, of course, will not tell me if there are any arrears on the account. They have confirmed the unit's size and maintenance fees and the week and so on.

My main concern is just what you're describing, John and Dave. I don't want to have some title problem come back and bite me later. I've emailed the closing company about title insurance and I want to see how much they charge. I'm willing to spend a couple hundred dollars to be able to stop worrying! If it's significantly more expensive than that, I might try calling one of the abstract searchers that John describes....
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Old January 3, 2007, 03:55 PM   #9
PeelBoy
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Resorts: Diamonds, RHC, Plantation Resort Myrtle Beach, Outerbank Beach Club
There is title insurance in Canada. It cost me $499 last time when I bought a single detached home. Lawyers usually recommend title insurance for resale, but not for brand new homes.
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