Title Insurance is a Must-Buy

Question: After my husband was out of work for almost six months last year, our credit was “shot to heck.” We cannot get a conventional mortgage loan so we are trying to buy a home in North Phoenix with seller carryback financing (i.e., the seller gives us a deed to the home and we make monthly mortgage payments to the seller). The seller says that in the twenty-five years that he has owned the home there have never been any title problems, and we should be able to save the cost of title insurance. Do we need title insurance?

Answer: Yes. No one should purchase a home in Arizona without title insurance. In addition, the type of title insurance for the buyer should not be the standard owner’s policy, but should be a form of extended coverage which would give the buyer more protection. The additional cost for extended coverage is minimal in comparison to the increased protection for a buyer. Most escrow companies have a brochure which explains to a buyer the types of title insurance and the cost.

Note: The seller typically pays for a buyer’s standard owner’s policy, and the buyer pays for any extended coverage. The buyer also has to pay for the title insurance policy for the buyer’s mortgage lender. There are numerous escrow companies in Arizona that handle escrow paperwork for real estate sales. There are only a handful of national title insurance companies that insure title to the buyer.