10 ms·

In the US, there is title insurance. If the seller didn't have the legal right to sell the house, the house reverts to the legal owner, and the buyer is paid ba

In the US, there is title insurance. If the seller didn't have the legal right to sell the house, the house reverts to the legal owner, and the buyer is paid back by the insurance. It's not possible to get a mortgage without title insurance, and a cash buyer would be nuts to not demand it from the seller. In some states (example, California) it can get more complicated, though, because the right to sell a house isn't the same thing as the right to live in it. They buyer may own the house, but not have the right to force the current occupants to leave. That's why it's important to state in the contract that the house must be completely empty before the seller gets paid, and every month that it is not completely empty, a few thousand dollars is subtracted from the purchase price.

merpnderp 5y ago
In some states you can buy a house without title insurance. I assume this is so that people who enjoy Russian roulette and jumping out of planes without parachutes can enjoy the same adrenaline rush when buying a home.
- tantalor 5y ago
  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.
  - drfuchs 5y ago
    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.
    - conductr 5y ago
      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
      - drfuchs 5y ago
        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"?
        WarOnPrivacy 5y ago
        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).
        conductr 5y ago
        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.pdf 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-title-insurance-is-a-total-scam/ https://www.texasobserver.org/entitled-to-profit-in-texas-ti...
  - deleted 5y ago
    [deleted]
  - kube-system 5y ago
    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 https://en.wikipedia.org/wiki/Heir_property
- bluGill 5y ago
  Some states protect their titles better than others. In Iowa (possibly other states) land transfers are done by the state who verifies the seller really has right to sell the property, so title insurance isn't something you need to buy. (title insurance does cover other things as well, so banks make your buy it for those things, but once the sale is closed it is your property)
- hn_throwaway_99 5y ago
  Perhaps, but in some places (aka Texas) title insurance is unnecessarily and outrageously expensive: https://www.texasobserver.org/entitled-to-profit-in-texas-title-insurance-is-a-total-scam/ https://www.texasobserver.org/entitled-to-profit-in-texas-ti...
horsawlarway 5y ago
Eh - depends on why you're buying the house. There are a lot of rental properties for sale with "tenants in place" in my area. If you want to live in it, then yes - Ensure seller is responsible for removal. If you want to continue renting the property then a lot of times it's easier for both parties to complete the sale and then let the current rental contract conclude before doing reno/construction.
- WarOnPrivacy 5y ago
  If there's a lease in place, that lease continues unabated. If the new owner wants the tenants out, the tenants have to agree to break the lease. Otherwise the tenants can continue to live there until their lease runs out. It doesn't matter whether these are the best options for the owner(s). They're the only options.
  - horsawlarway 5y ago
    Yes - I understand how leasing works (although you can absolutely build a termination clause in for either/all sides). That's why I say make it the current owners responsibility if you don't want tenants there: They must either invoke their termination clause (and usually pay a fee), or offer to buy the tenants out, or pay you some penalty fee for every day the house remains occupied after sale. Alternatively - if you plan on gutting the place anyways, and their lease is due to expire in less than 6 months: Leave them in place and keep the property bringing in some income while you schedule contractors and line up work.
    - WarOnPrivacy 5y ago
      > I say make it the current owners responsibility if you don't want tenants there: I can't say there has never been a home seller that would agree to that. I can say I never ran into it at our office, nor have I heard of it. Commercial real estate does all kinds of build-to-suit but residential property is generally sold as-is, with any improvements done before listing. In this market tho, sellers don't listen to buyer conditions. They just go to the next all-cash buyer who's probably offering over list price. > if you don't want tenants there: They must either invoke their termination clause (and usually pay a fee) Again here, I've never heard of a residential lease with a fee-based termination clause, nor prepared one or had one as a tenant. One possibility is that it's not legal in areas I've lived but I don't know. I'm visiting the attorney (now ret) this week so I'll ask. > if you plan on gutting the place anyways, and their lease is due to expire in less than 6 months: Leave them in place and keep the property bringing in some income while you schedule contractors and line up work. This is generally how it goes. That and the keys for cash thing you alluded to earlier. However tenants are less likely to take the latter because moving costs are typically equal to 2mos-6mos rent - and because renters have nowhere to go. Rent cost skyrocketed (15-120% here) and what few rentals there are have 40-400 applicants each. notes: I was offered a cash-for-keys recently when our previous rental was sold. Unsurprisingly, that seller stiffed us so it's small claims. My ex and her bf have been squatting in a foreclosure for the past few years. They generally kept it up. The buyer is letting them stay for another month until the remodel begins.
closeparen 5y ago
This seems backwards. To evict someone you have to swear up and down that you're going to occupy the place yourself. People get prosecuted for e.g. doing an owner-move-in eviction and then selling to a developer. The old owner doesn't have a legal basis to get rid of the tenant, but the new owner does.
- xyzzyz 5y ago
  From the perspective of the buyer, I don’t care how exactly the owner removes the tenant. It is immaterial to me. What I care about is that no tenant occupies the property I am purchasing. If the owner cannot guarantee that, eg. they cannot legally evict a tenant, that’s fine, I simply wont buy the property, it is the owner’s problem, not mine.
  - WarOnPrivacy 5y ago
    > I don’t care how exactly the owner removes the tenant. It is immaterial to me. What I care about is that no tenant occupies the property I am purchasing. Landlords can't legally evict a leased tenant who hasn't violated their lease. That there are tenants in the home would be part of the MLS listing, along with bed/bath. If you've gotten as far as inquiring about the property, you would know you're buying tenants (at least until their lease is up or they accept your offer to break it).
    - closeparen 5y ago
      A lease has a a duration; absent rent control, the landlord can let it expire. It’s specifically under a rent control regime that the landlord is obliged to offer indefinite renewals.
      - WarOnPrivacy 5y ago
        All correct.
- WarOnPrivacy 5y ago
  > To evict someone you have to swear up and down that you're going to occupy the place yourself. Where do you get this from? It's not like any US law I've ever heard of. For the evictions I've worked on, the homeowner simply wanted the tenants out (non-payment, etc) so they could re-rent or sell the property. They didn't ever have to live there.

merpnderp 5y ago

In some states you can buy a house without title insurance. I assume this is so that people who enjoy Russian roulette and jumping out of planes without parachutes can enjoy the same adrenaline rush when buying a home.

tantalor 5y ago
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.
- drfuchs 5y ago
  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.
  - conductr 5y ago
    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
    - drfuchs 5y ago
      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"?
      - WarOnPrivacy 5y ago
        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).
        conductr 5y ago
        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.pdf 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-title-insurance-is-a-total-scam/ https://www.texasobserver.org/entitled-to-profit-in-texas-ti...
- deleted 5y ago
  [deleted]
- kube-system 5y ago
  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 https://en.wikipedia.org/wiki/Heir_property
bluGill 5y ago
Some states protect their titles better than others. In Iowa (possibly other states) land transfers are done by the state who verifies the seller really has right to sell the property, so title insurance isn't something you need to buy. (title insurance does cover other things as well, so banks make your buy it for those things, but once the sale is closed it is your property)
hn_throwaway_99 5y ago
Perhaps, but in some places (aka Texas) title insurance is unnecessarily and outrageously expensive: https://www.texasobserver.org/entitled-to-profit-in-texas-title-insurance-is-a-total-scam/ https://www.texasobserver.org/entitled-to-profit-in-texas-ti...

horsawlarway 5y ago

Eh - depends on why you're buying the house. There are a lot of rental properties for sale with "tenants in place" in my area. If you want to live in it, then yes - Ensure seller is responsible for removal. If you want to continue renting the property then a lot of times it's easier for both parties to complete the sale and then let the current rental contract conclude before doing reno/construction.

WarOnPrivacy 5y ago
If there's a lease in place, that lease continues unabated. If the new owner wants the tenants out, the tenants have to agree to break the lease. Otherwise the tenants can continue to live there until their lease runs out. It doesn't matter whether these are the best options for the owner(s). They're the only options.
- horsawlarway 5y ago
  Yes - I understand how leasing works (although you can absolutely build a termination clause in for either/all sides). That's why I say make it the current owners responsibility if you don't want tenants there: They must either invoke their termination clause (and usually pay a fee), or offer to buy the tenants out, or pay you some penalty fee for every day the house remains occupied after sale. Alternatively - if you plan on gutting the place anyways, and their lease is due to expire in less than 6 months: Leave them in place and keep the property bringing in some income while you schedule contractors and line up work.
  - WarOnPrivacy 5y ago
    > I say make it the current owners responsibility if you don't want tenants there: I can't say there has never been a home seller that would agree to that. I can say I never ran into it at our office, nor have I heard of it. Commercial real estate does all kinds of build-to-suit but residential property is generally sold as-is, with any improvements done before listing. In this market tho, sellers don't listen to buyer conditions. They just go to the next all-cash buyer who's probably offering over list price. > if you don't want tenants there: They must either invoke their termination clause (and usually pay a fee) Again here, I've never heard of a residential lease with a fee-based termination clause, nor prepared one or had one as a tenant. One possibility is that it's not legal in areas I've lived but I don't know. I'm visiting the attorney (now ret) this week so I'll ask. > if you plan on gutting the place anyways, and their lease is due to expire in less than 6 months: Leave them in place and keep the property bringing in some income while you schedule contractors and line up work. This is generally how it goes. That and the keys for cash thing you alluded to earlier. However tenants are less likely to take the latter because moving costs are typically equal to 2mos-6mos rent - and because renters have nowhere to go. Rent cost skyrocketed (15-120% here) and what few rentals there are have 40-400 applicants each. notes: I was offered a cash-for-keys recently when our previous rental was sold. Unsurprisingly, that seller stiffed us so it's small claims. My ex and her bf have been squatting in a foreclosure for the past few years. They generally kept it up. The buyer is letting them stay for another month until the remodel begins.

closeparen 5y ago

This seems backwards. To evict someone you have to swear up and down that you're going to occupy the place yourself. People get prosecuted for e.g. doing an owner-move-in eviction and then selling to a developer. The old owner doesn't have a legal basis to get rid of the tenant, but the new owner does.

xyzzyz 5y ago
From the perspective of the buyer, I don’t care how exactly the owner removes the tenant. It is immaterial to me. What I care about is that no tenant occupies the property I am purchasing. If the owner cannot guarantee that, eg. they cannot legally evict a tenant, that’s fine, I simply wont buy the property, it is the owner’s problem, not mine.
- WarOnPrivacy 5y ago
  > I don’t care how exactly the owner removes the tenant. It is immaterial to me. What I care about is that no tenant occupies the property I am purchasing. Landlords can't legally evict a leased tenant who hasn't violated their lease. That there are tenants in the home would be part of the MLS listing, along with bed/bath. If you've gotten as far as inquiring about the property, you would know you're buying tenants (at least until their lease is up or they accept your offer to break it).
  - closeparen 5y ago
    A lease has a a duration; absent rent control, the landlord can let it expire. It’s specifically under a rent control regime that the landlord is obliged to offer indefinite renewals.
    - WarOnPrivacy 5y ago
      All correct.
WarOnPrivacy 5y ago
> To evict someone you have to swear up and down that you're going to occupy the place yourself. Where do you get this from? It's not like any US law I've ever heard of. For the evictions I've worked on, the homeowner simply wanted the tenants out (non-payment, etc) so they could re-rent or sell the property. They didn't ever have to live there.