Monthly Archives: August 2015

“Opting against title insurance to save money can be financially risky”

“Opting against title insurance to save money can be financially risky”

Architect presenting home project
| August 19

My mom lives in New York and is selling her North Carolina property to her sister who has been living in the home for the last 30 years rent free. Will a quitclaim deed work in this situation or do they need a real estate agent or a real estate lawyer? Both of them are on a fixed income and want to do this the least expensive way.

When you say that your mom is selling her home to her sister, is your mom getting any money in that sale? If she is, her transfer of ownership is truly a sale of the home and may require other considerations to get it done.

We’ll start off discussing if your mom is truly selling the home. If she is, she will probably need to have a purchase contract completed for the sale. You might need this contract if you want her sister to obtain title insurance on the purchase of the home. It is not unheard of that issues pop up with ownership of homes that have been held by family members for quite some time.

Your aunt should want to make sure that she gets good title to the home and you’ll need a closing agent to handle the transfer of ownership and transfer of funds between them. Depending on where your aunt lives, real estate attorneys may not generally be used in residential real estate transactions. If this is the case, you’ll need to find a closing agent or title company to facilitate the closing. If real estate attorneys are used in that area, you might have to hire one to represent either your mom or your aunt to handle the legal work.

Buying and selling real estate can be costly even if you aren’t paying a real estate agent a commission on the sale of the home. From the most basic, you’ll have to pay to record the deed to transfer the title of the property. In recording documents, you may have to pay transfer taxes and other local fees. Some locations may have other fees and may increase the property taxes on the transfer of the home.

And, if you have a real sale and have to buy title insurance, you may spend thousands of dollars to a title insurance company and closing agent for their services in connection with the sale of the home.

We usually recommend that buyers obtain title insurance when they take title to a home. We don’t know the particular circumstances of your situation but know that it’s usually better to be safe than sorry.

A number of years back, we followed a case where a son thought he owned a four-flat home. He had lived there for 20 years, rented the units, took care of the property and had thought that it was his. He had inherited the home from his father. However, when he went to sell the home, he found out that his father had not taken care of the paperwork correctly and 10 other family members claimed an interest in the building.

So, as we were saying, we generally recommend title insurance but that’s expensive. However, if you do it on the cheap, you run the risk of not finding out problems now that can be fixed only to have a bigger problem down the line.

Now, if your question revolves only about your aunt becoming the owner of the home, that’s fine. Your aunt can receive a quitclaim deed from your mother and your aunt will stand in the same shoes as your mother when it comes to the title to the home. Any problems or issues with the title will carry to your aunt’s ownership of the home. It may still be smart to get title insurance even in this situation, but we appreciate cost considerations and understand if you decide not to pay for that service and have your aunt take the risk going forward.