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Comment by tantalor | Hacker News Reader

It's common to buy real estate from someone you already trust, such as a family member. You know the title was good when they bought it, so you can bet the title insurance fee (several thousand dollars) against that trust nothing fishy happened since then.

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But what if something fishy happened before they sold it to you, but it isn't discovered until after? Does their title insurance still cover it? For instance, if their original purchase turns out to not have been legitimate to begin with for some reason.

Yes, title insurance is a single premium but gives the owner forever coverage. This is essentially the purpose, to give the buyer confidence that they are protected for anything that may have happened that they wouldn't know about, because the seller may not even know about it and potentially it happened 100s of years ago.

Where this gets kind of crazy is if you own a property and have title insurance on it from when you bought it, then you do a refinance, you're often required to buy the insurance again because that original policy ends.

All said, the loss ratio of title insurance companies is extremely low compared to other types of insurances. But in some places it's cost is fairly high (eg Texas) and it's mostly to do with strong political interests / lobbying

But what if I'm not the owner anymore? Specifically, I buy a house and purchase title insurance on it. Later, I sell the house to you. You trust me completely, so figure you don't need to buy title insurance. Later, unexpected to all of us, it turns out that my original purchase was somehow flawed, and someone else actually owns the house. You now ask me to now invoke my title insurance, and (since I'm such a nice guy) reimburse you. So I call up my title insurance company, and explain that while I no longer even think I own the house, something was amiss in my original purchase, and I want them to reimburse me. The title insurance company agrees that there was a problem at the time of my purchase. Will they then say "Yes, you're right, the check is in the mail" or "No, be that as it may, once you 'sold' the house we're off the hook; tell the guy who 'bought' it from you to contact their title insurance company"?

It's not rare for crap to come out after a sale, often w/o knowledge of the seller. Liens are the most common (HOA, contractor, tax).

I don't think it's very common. But even if it is, common does not mean expensive.

> Property/casualty lines of business typically experience pure loss ratios well above 10%, approaching 70% or higher at times. Title insurers historically have loss ratios in the 5% to 10% range.

https://www.naic.org/documents/topics_title_insurance_brief....

Also, 2017 in Texas 6% loss ratio. Other states are better in that they don't charge as much for the policy. However, loss ratios are still very low.

https://www.texasobserver.org/entitled-to-profit-in-texas-ti...

> You now ask me to now invoke my title insurance

That's not how it works (at least where I live, US state of Texas). I, having bought from you, would be responsible to have my own title insurance policy. Your policy would have essentially ended when you sold the home. It protects you during your ownership. ANd my policy would protect me during my ownership. Once sold, and title transfers (whether legit or not), you as the seller have no liability (mostly, I'm sure if you committed fraud or something you could be on the hook along with other criminal issues, but my insurance is still going to pay me if I experience a loss of my purchase). So...

> "No, be that as it may, once you 'sold' the house we're off the hook; tell the guy who 'bought' it from you to contact their title insurance company"

Yes, that's exactly what they would say. It's also why it's customary for the seller to purchase the title policy for the buyer during the transaction. Although, it's a hot market the seller could have the power to deny and the buyer would have to buy their own policy.

While you owned the property at some point in time, you never experienced a loss from the title issue because you sold before the title issue was known. Your liability also ended the moment you sold the property. It's always the CURRENT owner that needs protection.

>> Where this gets kind of crazy is if you own a property and have title insurance on it from when you bought it, then you do a refinance, you're often required to buy the insurance again because that original policy ends.

That's when you ask for the re-issue rate.

http://www.insuranceqna.com/title-and-mortgage-insurance/wha...

Still it's "40-60% cheaper" which means it's 60-40% more expensive than it should be. It's exactly zero additional risk and the point of insurance is to manage risk.

IIRC, casually passing down property to heirs is a common scenarios in which titles do become disputed.

Let's say your mom lives in a house, and she sells it to you without a title. No big deal, because it was family property she got from her parents and she's lived there her entire life. Right?

Maybe not, when your grandparents children and grandchildren show up and claim their fraction of ownership of the grandparents' estate.

i.e. https://en.wikipedia.org/wiki/Heir_property

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