Hey everybody, welcome to season two of Avoiding Real Estate Turbulence podcast. This is your pilot, Jon Lafferty with Century 21 Town and Country.
And co-pilot, Tony Abate, with Ross Mortgage and we are your real estate pilots. Our job is to be your real estate advocate and also make sure you’re educated about the buying and selling process. We’ll keep you informed throughout until we get you safely closed.
Today’s episode is sponsored by Title One. When you’re a seller or buyer and you’re feeling weary or small, with tears in your eyes, Title One will dry them all. They are on your side. If times get rough and friends can’t be found, Title One can be your bridge over troubled title issues. You can reach Title One at 734-427-8000, or email them at
I didn’t read that third paragraph, that’s a good one Jon. All right, in a real estate transaction there are many reasons why you can encounter turbulence. Today we are going to talk all things Title, with Ken Taylor from Title One. Welcome to the jump. Welcome to the jump seat, man. Welcome to the jump sleet
Thank you guys for having me I appreciate it.
Absolutely. It’s our first day by the way. I can tell.
It’s my first day, I feel like Homer Simpson.
I didn’t realize Jon was such a poet though.
He is, holy cow.
Skills that I didn’t know he had.
Yeah, I think he wrote it at the traffic light right outside here, sitting in the car. Very good, Jon.
In blood. So Ken, how long have you been in title? What made you get into title? Let’s start with just the basics there.
I’ve been in Title Insurance for coming up on 14 years now. I’ve been blessed to be with the same company, Title One the whole time. My, mother actually was, has been in the industry her entire life and got me started and more, the more and more I got to know the industry and move in different departments, found out I really enjoyed it and have stuck with it and gonna make a whole career out of it.
What do you like about title insurance?
I like, my favorite part about title insurance is, while in practice all real estate transactions are the same, they’re not. The puzzle pieces always are a little bit different. The way to get to a closing table is just a little bit different in every transaction and that uniqueness is kind of what, you know, makes me go everyday. That everything is, nothing is ever the same. Every transaction no matter how on paper it looks like it’s gonna be the same, is always different and new challenges every day and that’s something that I look forward to everyday. Trying to put the puzzle pieces together, to get everyone to a closing table.
Yeah, it’s one of those unseen functions, you know, we all kind of walk folks through the process, but churning away in the background literally from start to finish and even before start, with pre Title and what have you, that is absolutely such a critical piece of the transaction.
That’s correct yeah, it’s a nice search, a nice, like I said, keep putting the puzzle pieces together. It’s fun to draw a line from the start to end and, you know, we get to do that on every transaction which is fun.
You know what’s interesting is you mentioned, it’s like a crossword puzzle that you’re kind of putting the pieces together and what’s actually fun about that and the comparison is on our end as realtors on a buy side, or on a sell side, we’re kind of doing the same thing. We’re putting the pieces together for a puzzle and on the lender’s side, they’re doing the same thing with their borrower, putting the pieces together, a credit report and putting a file together and everything else and a lot of times, well not a lot of times, but quite a few times, my puzzle ain’t gonna fit the puzzle you have and it’s not gonna fit the puzzle you have, so we have three different puzzles that we’re trying before we get to the closing table to make all work together and there’s some times it just doesn’t so we end up putting off closing and we sometimes don’t get to the closing table because of it.
Yeah, it is, like you said, three different areas and we’re all, almost like we’re juggling all together, and you know, we’re trying to juggle different size balls at the same time, and different objects, and you know, we’re all trying to get to the same place but doing it in very different avenues and directions and you know, not many people see that obviously ’cause it’s way behind the scenes and, you know, all they’re seeing on the front is, “Oh they’re just showing me a house. “Oh that’s, you know, “they’re just gonna give me a bunch of money to buy a house, “and this persons gonna make me “sign a bunch of pieces of paper, it’s simple. “It’s pretty simple.” But it’s really not. It’s a pretty in-depth and intuitive process to get to that point.
So, what is Title insurance? And is it like the, is it similar to the undercoating that you’re offered at a paint store when they’re gonna repaint your car and they wanna throw in the undercoating for an extra charge that you don’t necessarily need? Is title insurance the undercoating? Or is title insurance much more important than that?
No and I might be a little biased, but title insurance is the most important purchase in a real estate transaction. Title insurance is the financial protection for all parties involved, I guess, against any risk, loss, defect, that affects real property or real estate. So it protects everybody to make sure that there is no leans, no encumbrances, and that real property can be transferred from buyer to seller without any hiccups or any future losses or damages. It’s a policy that is purchased one time, at the closing, and is good for the life of that you own that property and people think, they sometimes get it confused with home owners insurance, it’s not the same thing. We’re not gonna come and, you know, if your basement gets flooded, replace your basement. We’re there just to protect the interests that you have in your real estate transaction and like we said, one time fee upfront and it protects you for the life that you own the property. So while it seems like a big cost at the beginning, it’s a smart investment over the lifetime that you’re gonna own your real estate or your house or whatever you purchase real estate wise.
You know, I can tell you when I’m talking with buyers and we’re running through the steps and the costs involved with getting a mortgage, that concept of title insurance is, it’s a little bit nebulous. It’s a little hard to wrap your arms around and I think a lot of consumers, I know I sure did before the business, before I was in the business, the idea is there’s this deed, this all important piece of paper, that once I hand it from myself to the next person, that’s the sale. That’s how the ownership transfers. But really and I hope this is an apt description of it, but what I like to tell folks is, “What’s the makeup of that deed? “Is it even valid? “Does that person have the right “to sell you that property in the first place?” Because the deed is only as good as the title insurance backing it up, right?
That’s correct, yeah cause anybody can go, you know, prepare a deed, get it recorded at the County and transfer ownership, but what we’re doing is insuring that that ownership has a legal enforceability and that person who is transferring the property has the authority to do so. You know, you don’t wanna go buy a real estate transaction from, you know, your Aunt who inherited their property from Grandma and come to find out that the other two Uncles in the family had an interest in the property. You know, that’s what we’re really here to do is to, we take a snapshot of the property, the history of the property, and make sure that you have, the seller has the legal right and authority to transfer the property cleanly to the purchaser, so they’re not gonna have any issues moving forward with the ownership of their home.
Yeah and where the rubber meets the road where it becomes true insurance, is that if one of those flaws comes up that you described, an unknown owner that bubbles to the surface, or an unknown lean, the insurance company pays the claim, right? They make that property owner whole for a loss.
Yep, they will. Just like home owner’s insurance, you file a claim under your policy and the underwriters who back, all title insurance companies will research what the problem is and they will make that home owner whole by, you know, either researching and taking care of whatever the claim is, be a, you know, ex, you know, Grandma or Grandpa who owned the house and making everyone whole, but that’s what the policy’s there for. They take care of any encumbrances or leans that may pop up after the real estate transaction.
So in a case where you have, well first let me ask you this. Are there instances where leans or encumbrances on a property are not caught in a title background search and a commitment for title insurance is issued, and then they’re only discovered down the road when the next person wants to sell because either somebody’s come forward, or documents have suddenly appeared? That stuff happens and that’s what title insurance covers as well, correct?
Correct, it does happen. Obviously we are in the business of instead of risk mediation, or you’re assuming risk, we’re trying to prevent it. So we obviously do the research on the property but, Counties aren’t always 100% current to their recording documents, they’re obviously busy all the time. So there’s a gap period, we call it. Between when you close and when the County is recorded to, so there are times that documents get recorded in between, or just slightly after or maybe someone didn’t go and record a lean and they thought of it two months after you purchased it, but that’s what title insurance is there for. They would go in then at that point, if it was found out and correct whatever is needed. If there was a lean because, you know, you did some work on the property and the contractor didn’t get paid and they filed a lean six months after you sold the house. That’s what title insurance would go back, take care of it because that does happen sometimes, where post-closing, either it was recorded late or someone had a lean that they were gonna record and just forgot and they went and put it against the property anyways, even after the home owner sold it. That’s what the title insurance is there for, to help protect the new homeowner that they will have free and clear ownership of their property.
And then the title company goes after the previous homeowner to make themselves whole?
Correct, yeah. With underwriters, you know, do their due diligence, hire attorneys to go after the parties who are ultimately responsible for the defects that have occurred either before closing or immediately after.
I think it’s an interesting progression, probably long before any of us were in the business, before there was such thing as the common title insurance policy. It was abstract to title, wasn’t it? And correct me if I’ve got this wrong, but that was basically where you wanna buy a piece of property, you hire an attorney to do the search and he comes up with that search or abstract to title and he says, “There’s the history of this property. Have a nice day.” And it was kind of upon whomever was looking at those documents to make sure that title was perfected and if there, if there was some flaw that was discovered at a later date, probably the only recourse was to sue. Whereas now a title insurance makes it a far more protective and less risky thing where it’s like, now if it’s not discovered until after the fact there’s an insurance policy behind it. That’s kind of how it flows, isn’t it?
Correct, yeah and now title company, we take on that abstracting portion. It’s our job to and the standard is 40 years, we go back 40 years on a property and look at the whole snapshot in that 40 years. What has happened in that 40 years? And what do we need, as a title insurance company, to take care of in order to transfer that property from a seller to a buyer free and clear? And that’s really, on us in the background to take care of that.
40 years, I don’t think I ever knew that. I knew it was a look back but, I don’t know if I just assumed it was to infinity, or what.
40 years, that takes us to what, 70?
Out of curiosity, when you’re going back and you’re looking at properties that are located in neighborhoods, sub-divisions, maybe where association language was inserted, you know where I’m going with this?
I don’t know Okay.
I think so.
So where language was discriminatory and exclusionary for certain groups, for certain races, I’m just wondering how much of that you come across nowadays? Or are we, at 1970 when you go back 40 years, do you not really see it that much any more?
You still see it, typically what we call, they’re in deed restrictions, is how we would take them. Typically even going back 40 years, those deed researches they follow the life of the property, even if it’s, you know, we only went back 40 years and that deed restriction was put on 50 years before that, it still follows the life of the property. Now laws have actually changed, so it almost cancels it out, but you can’t, deed restrictions aren’t something that you can just remove, they follow the life of the property, but there’s other laws that counteract or contradict what those are.
But yeah, they follow the life. We do run into them, do see them and there are some pretty funny ones. There’s one, I live in Milford, there’s a deed restriction you can’t have chickens in the village of Milford, and that runs with every property, which I find to be funny. Not that I was going to but, it’s specific in that.
In the deed restrictions?
No chickens. Tony wouldn’t make it.
I wouldn’t, no, I’d have to move out, yeah. You put an interesting spin on that though So the deed restrictions don’t go away, they follow the life of that property, they just become unenforceable if they are restricting something that, well protect a class I guess is what it would be considered.
Interesting. So you probably do still see the language?
Yeah, you still see it, especially in the, we used to call the, older neighborhoods. Detroit, Dearborn, Dearborn Heights, you know, where obviously Michigan’s main population really started and kinda grew out. There’s still some of those in there.
Yes, those two as well.
That’s another, I won’t bring that up. I’d love to have a conversation about that one day. Okay so, just talking about that, we kinda touched on what title insurance is, kinda why, if you’re a buyer you wanna have it and as a seller it covers, you’re covered from your previous policy. So if I’m a seller and I’ve lived in my house for 10 years and I was given a commitment for title insurance when I bought the property, why can’t I just hand that to the buyer and say, “Hey, here you go, I didn’t, “I bought my house cash and “there’s no leans on the property “so here you go, Mr Buyer, “here’s your commitment for title insurance ” from the previous title company 10 years ago.”
Yep. Two things on that. One, not that you don’t wanna be a trusting individual but, anybody has the right to lean a property, so even if you were the most upstanding citizen, you’re friends with everybody, let’s say that even a mistake was made. You know, you could still discover a lean on a property, that does happen quite often where maybe a County recorder inputted something wrong or they put, a wrong lot number, or even section, or township in the legal description when filing a lean, it could arbitrarily be placed on your house. Now, that doesn’t mean that there’s not ways to take care of it, or remove it, but there still could be a lean even if it’s an arbitrary lean. So no matter even how confident you are that there is not a lean on the property, it’s still the best idea to have that reassurance, to have that research again done, so that if I’m a buyer, I would like, hey, I still want a snapshot of it, if it was one month or 10 years. I wanna make sure that nothing has happened so that I can have it free and clear. Second one is, state of Michigan, I have not seen a, have yet to see a purchase agreement where it doesn’t have listed in the purchase agreement that the seller is to provide owner’s title insurance policy to the purchaser. You know, state of Michigan is a title insurance state, and it’s in every purchase agreement, the seller is to provide a title insurance policy to the purchaser, so even if you were wanting to get away with, nah we’ll just use the last one, you still need a new one every time.
I can see that, you know, with the risk being absorbed by the title company before that conveys on a new person who’s now insured, you’re gonna wanna say, “Hold the phone here, we gotta do a little research “and find out what happened during that window of time.” Yeah. Not assignable.
Can you talk about the difference between a commitment for title insurance that the seller provides and the title insurance that a buyer is required to purchase if they’re getting a loan on the property?
Well the seller is providing an owner’s policy to the purchaser, that is stating the buyer will own that free and clear, that there is no leans or encumbrances on the property.
And if there are, they’ll be satisfied at closing.
Correct, they’ll be all taken care of and transferred. They’ll be able to have that deed, what they call, without any leans. A buyer’s, or what we call the lender’s policy that is required when there is a lender involved, what that does, and this sounds a little ominous, a lender’s policy is there to enforce the foreclose ability of a mortgage. It sounds kind of ho-hum but, if the buyer does not oblige by the terms and conditions of their note that they sign when the bank says “We’re gonna give you $200000” Then that policy says the bank has the first right to take the house back and that’s why all lenders require a title policy ’cause they put a lot of money, or a lot of interest in a property and they wanna make sure that if you don’t do what you have said you were gonna do, that that bank has the right to recoup their losses by taking the house back and then being able to sell it again. So that’s why it’s required for every transaction, that a buyer purchases a policy for the lender. Kind of an added layer of insurance for that bank to make sure that they’re getting their payment every month.
I think added to that, let’s fast-forward and say that we do as a lender, have to foreclose on a property, we wanna have the same protection as, now we’re the new owner. We wanna have that same unencumbered protection as the previous owner did as well and that’s what that title insurance does for us, right? You know, we’re protected to the size of the loan and the owner is protected to the size of the price they’ve paid for the property, but yeah, you know, when you think about it, the foreclosing lender they would want to know that it didn’t come with a lot of title baggage attached to it if they, heaven forbid, do have to do the foreclosure.
Yep, they don’t wanna spend extra money on clearing up things that should have been taken care of. So every time it’s, enforced for every mortgage transaction, must have a lender’s policy to make sure that lender has that protection as well.
Can you talk about an owner’s policy. What a typical owner’s policy looks like? So typically we see schedule A, schedule B, can you just walk us through what a typical owner’s policy is gonna look like and what somebody who’s never looked through an owner’s policy before, what they should be looking for and where things are kinda located?
Yeah, it’s usually broken up into three parts. Schedule A, B, or Schedule A, Schedule B, and Schedule B2. Schedule A is just kinda giving you the summary, this is the property, this is the legal description of the property, says the owner, current owner, which would be the purchaser, and the amount of the insurance, so it’ll tell you how much your policy is insured for. Schedule B would reference any, what we call, items that we are insuring with the loan. If it’s a cash sale, there’s no lender, it’s blank, in that sense it just says, you’re responsible to pay your taxes for any future taxes, any assessments that pop up in the future registered with the city or county. If there was a mortgage taken out, it references that in Schedule B saying you also are responsible under the terms of this mortgage, if you do not then the bank will take the house back. Schedule B2 is probably the one that confuses people the most, we call that the exception page. Those are items, much like deed restrictions, that run with the life of the property, that do not hinder, do not hurt anybody but they’re items, like easements, right of ways, power lines that would go in, if DT had to go in there, they would have what they call an egress or ingress access to those items. Just therefore your benefit sold. You know that people aren’t just arbitrarily coming on your yard, or coming in your property. But they’re items that run with the life of the loan, or life of the property, that allow certain people access for certain utilities or items of that nature and that’s usually where people get tripped up because they say, “Well, what do you mean I don’t own this?” Or people have the right but, you know, you wanna be able to have DT come and fix your box if you have trouble, or to fix your power lines, or the city to come fix any sewer lines that are on there, but that’s it, there’s three sections and it just kinda gives a little bit of summary of what the whole process you went through and that’s what you have as protection for anything that were to pop up, either before your closing or pop up after that were not for you, if it was a previous owner or anything of that nature.
Now you bring up something and I’m sorry, I know we’ve got some questions here, but something just occurred to me. Years ago, there were mortgage surveys done on almost every transaction.
You know, they were
Not that many years ago even,
Maybe 20 years ago they were done.
Yeah, if that. It seems like maybe just pre-recession is where they kind of faded away and, you know, as an old-school guy, I’ve always been an advocate of, you know, you kinda want that survey. It’s not that expensive and it can show you a lot and then the fact that that’s faded away and is almost non-existent now for most real estate residential transactions. They’re just not needed any more and I think a lot of it has to do with the coverage that is provided by the title company against you know, boundary disputes, what have you. Is that something that changed over time? Or is it just a new view from the lender perspective? Or why did we always need them, to the point where now we never need them?
I think what it was is underwriters kinda got together as a whole, you know, especially with the advent of site condominiums and sub-divisions that have popped up that way. Underwriters have kind of gone with we have a plat map or the drawing of the boundary lines, we have recorded exceptions or easements and egresses and we’re gonna have every home owner sign an affidavit attesting that they haven’t changed their boundary lines since they’ve owned the property, you know, they haven’t put a fence on the boundary line. We’re gonna have them all attest to that and they felt that was enough, enough of a strong coverage to where they didn’t need the mortgage survey anymore to ensure that where the boundary lines are at. I think they might have gotten a little push from maybe realtor associations saying well my, you know, it’s another cost that’s being incurred to my customer, they have to go and get surveyed and it might cause a delay, so they kind of went away with the having to require that survey to give that boundary line coverage. They just decided with all the information that they had and especially with the seller attesting, “No, I haven’t done anything.” That’s kind of a big thing ’cause if you then did go back and say, or found out later that the seller did change the boundary line, they have a sworn affidavit saying, “No, I swear I didn’t.”
Yeah, I’ve never been comfortable with that change. You know, I gotta say I prefer it when the transaction closes with the survey, but they’re unicorns, you just don’t have, unless you’ve got a really oddly shaped property or it’s adjacent to water or something that says you really should have one, they’re just not done.
You see it more now, new construction, by the water and acreage. Acreage still is the highest because it’s not as simple as, “This is the lot that we have” It’s from the point of beginning and there is a whole bunch into it with, what they call meets and bounds coverage. Those are the three typically still. You still see them but, you still said not as highly as you used to.
I guess I think back to when we were doing them regularly, and I know you ran across this too, Jon, in transactions, even on the lot block and sub-legal descriptions, you just ran into stuff. It’s like, “Oh, what’s that shed doing there?” Or “Wow that’s a pretty big deck, but what do you know, “it’s encroaching out over the neighbor’s line.” And stuff that was just discovered that didn’t stop happening, we’re just not seeing it any more, you know? And maybe we’ve all just become a little more lenient overall, but I tell you, if it came back into the fold and surveys were needed on these transactions, I would not protest. What $150 maybe?
For a survey, it’s a pretty inexpensive look in my view, but that’s the old man talking, I guess in me that likes to see them.
I mean you probably had to address concerns with buyers and sellers.
Let me just say this. I had a couple, buyers do surveys, not acreage, but just, hey it’s, it’s a lot in Royal Oak. We’re gonna do a survey on this ’cause I want to know what my boundaries are. I wanna make sure that the neighbor’s garage, or my garage, ’cause they’re both, one’s on the right-hand back end of the lot, mine’s on the left-hand back lot, I wanna make sure that I’m not encroaching on his, he’s not encroaching on mine. So he decided to get a survey done. It’s a standard Royal Oak lot. 50 wide by, 110 deep. Not a big deal. $750. That is standard, my friend.
Come on, no, that had to be a stake survey.
Well yeah, it was a stake survey.
Well we never did those for mortgages though.
But I mean finding a survey company that and most of these guys, survey companies are busy, you know, you’re three weeks, a month out, so you end up delaying a transaction, you’re down by another 700 to a grand in coverage. Also, what do you do in the instance where, a house butts up against a lake and now our mutual client had to get an elevation survey, if you remember who I’m talking about, he had to pay for an elevation survey because he had a main water, main artery of a river running through the back part of his property and he had to pay for an elevation survey for insurance purposes. I don’t think it was for your purposes, I think it was insurance purposes he had to get an elevation survey. That was, I think that was a grand. So he ended up spending, I wanna say, he had out of pocket another $2000 between the survey itself and the elevation survey in addition to all his other costs.
Yeah, yeah, I think we’re, and again I know I’m the advocate for the survey, I guess, but I think we’re looking at some different things. You know, you have the, I think more accurately, called the mortgage certificate survey, which didn’t take three weeks because they weren’t super-duper precise, right? I mean they’re kinda just confirming this is what the plat map says, this is what we appear to have and then they can shoot line and say, “Well there’s that deck kicking out over the line.” Where the stake survey, they’re gonna get out there and they’re gonna be super-precise, that does take longer, and then the elevation surveys, we usually see that in the context of, maybe disputing a flood zone determination, you know? And those last too, Jon, no disagreement. Those get really expensive and they’re, they’re time-consuming no doubt about it.
I guess from my perspective, if you’re gonna have a survey. Why? If you’re gonna have a survey, if it’s gonna be required, why would you take the, “Hey this guy’s gonna show up, he’s gonna run a digital line “to make sure just that the property’s this way and this way and all right, we’re good.” 250 bucks later, we’re on our way to closing. I mean if you’re a home owner and you actually want to have a survey, why wouldn’t you want to have it staked so you know exactly where your boundaries are? I dunno. I mean if it’s gonna go that route then go all in. If you’re gonna require a survey, then make it a stake survey so it’s official.
Yeah, Yeah. I see the point, I see the point. Maybe it’s sometimes a judgment call, I mean if you’re looking at that property and the property lines are relatively clear, sometimes you got the power pole in a corner or something like that and then, as I referenced earlier, you got that really, really cool deck that’s been added on or maybe a dormer that was added to the house or something and you wanted something that was gonna show all the parties we’ve got an encroachment here. I would argue that the mortgage certificate would at least start that conversation. Maybe if it got hot and heavy with attorneys involved, it would have to be escalated to a stake survey, but I would stay in the camp that says that that mortgage certificate is still going to identify some things and give you something in writing that is more than just someone’s opinion that says, “You know what, “I think you poured your driveway a little wide.” Or, “I think you built that deck a little too big.” So I hear ya. Also too they’re quicker. I mean in my experience and granted it’s been a while since we’ve done ’em, mortgage certificate surveys are a couple days out.
And between 100 and 200 bucks is a rule, right?
Yeah, around depending on how large you get them
I, you know, again I wouldn’t say that everybody agrees with my position, but I would argue for that cost you get some pretty good information with what’s out there. I know it’s kinda sounding like the, you know, back in my day type of a conversation.
Well, sometimes I would say that, you know, something like that comes back let’s say that it’s, you know, it’s not a precise boundary measurement. It’s a, it’s a “Here, okay we’re gonna do the best we can “with where the boundaries are.” and let’s say that they come back and say, “Oh boy. “Looks like the driveway is about “half a foot “on the neighbors property “and this could be an issue down the road.” And now the whole transaction is in. Now they have to pay for a survey on top of that to make sure, at least you want to, to make sure that it is six inches encroached on the neighbors property and not just, “Okay this guy says it is, but what if it isn’t?”
I dunno, I think you open up a whole ‘nother can of worms. I think if a buyer wants a survey and they wanna get one, pay the money, get the real deal, satisfy yourself, done and over with. Whereas this other one I think just, there’s a potential there to raise way more issues. I dunno.
That’s fair, that’s fair. What I can see Does it raise an issue? Yeah, should it raise an issue? Maybe so, you know, maybe it’s something that should be looked at. It’s a step to take to have a a certain level of validation before you spring for the bigger survey. You know, and again, it’s not to the millimeter accurate, I get that, but it’s quick, it’s relatively inexpensive and it can be telling as far as, you know, validating a concern or maybe showing concern that nobody knew was there in the first place and then it can be kicked up to the next level. I guess my position, if it’s not done, you never know.
Where do they find these people to do these mortgage surveys?
I mean are these actually land surveyors that are going on doing it?
Yeah absolutely. Same survey company that say,
Not as many companies
do the stake surveys will do that. You know, locally here the ChemTech and the George Jeromes. They’ll do that.
They will do a mortgage survey?
You know, simple. Yeah and like Tony said, mortgage survey ’cause there are still rare times ’cause we used to, back in the day, have to order them all the time and it, you know, typically it’s, they’d wanna see our commitment cause it gives a legal description. You know, and so they can see everything that we have pulled with public record and they go out and, like you said, yeah four days, 100, $200, kinda rate in that range depending on how big the property is.
Yeah. That’s like a point in certain locales, it was a title company that would order them.
We would order them all the time.
I miss them, I guess that’s my point.
I could see a use for them in, in perhaps, communities where houses are on larger lots and and maybe, odd shaped lots. I could see a purpose for them, but I think your standard 1950’s, 40’s, 60’s, 70’s, sub divisions, where cyclone fence has been up for 30 years. I dunno, I just, I think there’s no reason to have those at that point.
Clearly the industry has decided the same.
Decided the same thing.
And we have not, I mean have you seen a big uptake in boundary dispute claims?
Yeah, so there’s something to it, you know. So, interesting thing that I saw sometime, years ago and it was discovered in a mortgage certificate is you had a relatively newer sub, nice simple rectangular, rectangle-stipple, typical scenario. One guy at the end of the block and I’m gonna pull some numbers outta the air here, he said, “I’ve got 60 feet from the side of my house “to my lot line.” and survey comes back and he’s got 35 feet. What the heck? That’s not right. Well,
Could’ve been, could’ve been, but actually what happened is that, the first house at the other end of the block that was built first, was parked in the wrong spot and then that one set the pace for the next house and the next house and the next house and the next house. They were all in the wrong spot, but it wasn’t discovered til that end house was built and then there was a desire to see, “Well how far am I from my lot line?” and very unique situation. I’ve, you know, gosh I’ve seen it once in 30 years, but that was a, you know, how do you crack that now? I mean I don’t remember what they did quite honestly. It is what it is. You know, you’re not gonna move 30 houses or redraw the plat, but it was discovered with the mortgage certificate I will say that, so. I sound like I’m on the payroll of a survey company, don’t I?
There’s a ChemTech sticker on the back of Tony’s bumper.
Well, so we’re talking about this lets, let’s go right in and talk about, you know, in a lot of purchase contracts there are, there’s language that says, a Title policy shall be issued, with standard exemptions and others have said there will be a title policy existed without standard exemptions. What’s the difference? And what are typical standard exemptions that are being excluded and then included?
You’re getting still, a title insurance policy if you’re getting with, or without. The without, is a little more, has a little more, I guess, oomph to it cause with standard exceptions, you are taking exception to, meaning you are not covered by any boundary lines. You’re not covered by and that’s really the biggest one, you’re not covered by boundary line exceptions. Without means you are, we’re removing that exception, meaning you are covered and that’s probably the biggest one. Probably where Tony was gonna give more for mortgage surveys, but again, as long as, you know, the seller has attested an affidavit that they haven’t move boundary lines, most underwriters will still issue that policy without standard exceptions. You know and also, with exceptions, another big one is mechanics leans. Where new builds, renovations, you know, those don’t get covered and that’s, you know, I just listened to our Michigan, one of our underwriter, our Michigan agency representative state that again, for the, however many years in a row, mechanics leans are the number one claim under a title insurance policy. You know, you have work done on the property, you don’t pay that contractor, comes right over and that’s a lean on the property cause they want their money and with, doesn’t cover you for that, without does and that’s probably, it’s a very big reason to, I would always suggest doing without exceptions for your policy. Just gives a little more coverage and protection for you as, not only seller, but the purchaser and everyone involved.
I haven’t seen a chart in years. Is there a cost difference, with and without?
Or is it just a choice?
Just a choice.
Yeah, so why would anybody not. Well you hear those stories about the mechanics leans too and it’s, and what seems to bubble to the surface a lot is that, you know, some can be, like you described, the homeowner didn’t pay a contractor, but the scarier ones in my view is when a homeowner highers a general contractor, the general contractor doesn’t pay a sub contractor.
Out of the purview of the homeowner.
You know, that’s not his business. It is, but it isn’t and then that sub contractor leans that property.
Yeah. That’s scary stuff.
It’s very scary stuff and it’s probably our, not number one battle, but it’s our number one, or at least one of our top ones, of our what we try to clear or, for our title requirements. Is making sure, you know, if you bought a house a year ago for 50000 and you’re turning around in eight months and selling it for 150000, we kinda know something’s happened. I mean, we know the, you know, market’s been rising, but that’s a pretty high tick and you know, we’re, we’ll ask those questions, we’ll see. Was any contractors hired? Was work done on the property? Okay, well lets take a look, we wanna, the form, the main form is called a sworn statement and a waiver. Sworn statement is the general contractor stating, “I hired, I did this amount of work plumbing, “heating, cooling, cabinets for this amount. “I paid this amount.” and then a waiver, is that subcontractor stating, “Yep, I’ve been paid in full and I won’t lean the property.”
Check and balance.
Check and balance, and that’s our number one, you know, fight, especially in today’s market where people are buying a lot of, you know, houses and flipping them and reselling them.
And new construction too right?
And new construction as well and, you know, we get a lot of push back as a lot of homeowners state, “I did all the work. “It was all me, I did everything.” Which, maybe they did, people are handy. I’m not, but people are handy, but, you know, you didn’t go and mill the wood. You didn’t, probably, make the granite countertops yourself and, you know, suppliers are among contractors that can lean the property. You know, Lowe’s has the right to lean the property. The granite company, you might’ve been the installer, but if you didn’t pay the granite company they can come back and lean the property. So, you know, that’s been a big uptick in title Legate’s clearing and requirements in the past. Probably, five years has been the biggest fight is, making sure that we are, getting rid of that mechanics lean. Worrying that, that contractor coming back and leaning the property.
Well how deep do you guys go then? If, lets just say you have a new construction and you’ve got the buy side. The owner says, “Well here’s my owners policy.” How, is it on the sell side? That it’s their responsibility to get the names of the contractors, sub contractors, to make sure that they all sign a waiver. Is it on them? Or is it on you as the buy side to do that?
We take is seriously on all sides. We take it a little more seriously on the buy side, if we’re representing a lender because what other people, also people don’t know is a mechanics lean, will jump the mortgage lean position. So a mechanics lean will go in front of the lender’s lean position, causing them not to be able to foreclose the home. So we take that pretty seriously. We wanna make sure that, you know, we’re telling the bank, as a title company, we’ve cleared everything so that you have foreclose ability. Well if we don’t double check and contract your leans of property and all of a sudden the bank can’t, well they’re gonna be pretty upset at us and we don’t want that to happen. So it’s really on whoever’s representing the seller to, work with them, get in contact, either the seller directly getting their general contractor to fill out that sworn statement, getting waivers from the subscontractors, but, you know, there’s been times where we’ve forced the issue a little bit because we wanna protect everyone. That’s the main, we wanna eliminate the risk moving forward and that’s really what we’ll do, but yeah. Mechanics leans will jump the lenders policy and we wanna make sure that is taken care of.
You brought an interesting scenario I’d never really thought about and boy, this is a cautionary tale for consumers and so, a home buyer looks at a new home and it’s been flipped, pretty darn common over the last handful of years and that seller says just what you said, “I’m a craftsman, I did all this work myself. “I’m very proud of what I did.” But if he obtained, a granite counter top from, from a local stone supplier or something and never paid that company, even though he installed it, that granite supplier can lean the property that it was installed in. Wow, so in other words, it’s not a get outta jail free safety net to hear, okay the homeowner did all the work himself therefore, there’s not gonna be any construction related leans. There absolutely could be.
And we don’t wanna be so, you know, pessimistic and skeptical of everybody, but, you know, you gotta be a little realistic in terms of, you can be handy, I mean we get it, but you didn’t, you know, unless you are that handy where you’re milling the wood, you’re building the cabinets all yourself, it’s highly unlikely that you’re doing all of it by yourself.
So the main lesson here then is, if you’re buying a new construction, a home that’s been flipped or just a regular home in general, you wanna make sure that you get a title policy without standard exemptions to protect you from any type of mechanics leans that could be coming down the road.
Correct. Yep and that’s, like we said before, it’s the number one claim, you know, and then it’s our underwriter, hiring an attorney going after, you know, going after the previous owner to make sure that they paid the contractor to remove that lean, but that’s been the battle passed, you know, five, seven years that’s been the number one thing. As houses, you know, people were buying them when they were still a little loaf, turn it around, fixing ’em up, selling them, so. It’s, you know, it’s a lotta, a lotta work and sometimes you offend people cause they’re gonna tell you that, “Oh why don’t you trust me that I paid for it?” and I want to, but also, it’s a lotta, it’s a lotta trust and, you know, it’s a lotta, a lotta money’s involved when buying and selling a house, so you wanna make sure you are dotting all the I’s and crossing all the t’s.
Well you know, it’s so interesting as I think that through you know, you could have that craftsmen homeowner who did the flip and it could be something as simple as saying, “Well you know what, that granite that I installed, “that is absolutely not “the color and design that I asked for, “so I never paid that shop. “It’s fine, but it’s not what I ordered “so I didn’t pay ’em.” Could be a legitimate dispute, but now suddenly that becomes that new home buyer’s, that new homeowner’s problem.
That’s really interesting, yeah.
Like Jon said, new construction, big as well. I think we’re at a good point. You know, there was obviously a lotta builders kinda went away during the recession period and, you know, the good one stuck through, but, you know, builders are very aware of that cause, you know, it’s on them. They’re the general contractor. So they’re gonna get hit the most if they don’t do their due diligence the way we asked them to so, yeah that’s a standard requirement on every new construction you get a whole list of, sworn statements and waivers to call in.
I think we’re about,
What do you think? Are we hitting the stops? Good stuff.
Well, you know, we still got a lotta, I still got a lotta stuff for you here, Ken. Would you mind coming back next time, for our next episode?
Whatever you like.
Maybe we’ll do five or ten questions.
Perfect. Have them back. Well I’d like to thank Ken Taylor, with Title One for stopping by today and appearing on our episode to answer title questions. Ken, if somebody has title issues or wants to order an owners title policy or have you get a lenders policy for them, how do they reach Title One? Again, let’s remind them.
Phone number, 734 427 8000 734 427 8000 734 427 8000 or email us at email@example.com firstname.lastname@example.org email@example.com
And inc is spelled I-N-C
Correct. Always there, we’re happy to talk, you know, we want everyone to have great experience and happy to help anybody that need any title insurance questions.
Well Ken, I can tell you we’re happy to have you as a business partner. You guys do a phenomenal job with what you do
We love working with you guys.
A pheromonal job.
A pheromonal, exactly, gotta stop using the big words. Thank you for listening to Avoiding Real Estate Turbulence. If you’d be so kind to subscribe and review and rate, we would appreciate it. Please share with your friends, family and coworkers that they too can find us on FaceBook, YouTube and avoidingret.com and avoidingret.com Where you’ll find our contact information and every episode. You can also find us on Apple Podcast, Google Podcast and Spotify.