Believing Miss Mildred (a true parable of shade trees, neighborly trust, and a bottomless cup of coffee)

Miss Mildred

Once upon a time, a young fresh family bought a fine old home in a fine old subdivision dotted with a veritable forest of fine old shade trees and lakes, not to mention neighbors of a similarly fine old stature.

One day, the young fresh family brought home a frisky new puppy. Nothing would do but to fence in their fine old back yard to protect their new faithful friend. Daddy James, a real estate professional, went next-door to see Miss Mildred, their fine old neighbor who had lived in the fine old neighborhood for nearly too many years to count.

Miss Mildred, aside from knowing her way around the kitchen, was a fountain of knowledge on all things important to their fine old neighborhood, including who owned what, and what went where.

In this case, the question was whether the fine old oak tree between their two properties was on the young fresh family’s side of the line, or Miss Mildred’s?  It seems that James, the real estate professional, had not procured a survey when the young fresh family purchased their fine old home.

Over an endless cup of coffee and a scrumptious piece of homemade cake, Miss Mildred opined as to how the fine old oak tree was on her side of the dividing line. Unwilling to question such an acknowledged neighborhood authority, James, the real estate professional, reckoned that their new fence should be placed on the young fresh family’s side of the tree.

Nary a word was ever spoken again on the subject until the young fresh family expanded, and the time came to move to a larger, finer new home.  Much to everyone’s surprise, the buyer’s survey revealed that the young fresh family’s fence had been installed a couple of feet inside of their actual property line!

When questioned by the buyer’s Realtor, then the closing attorney, James, the real estate professional, happily recounted the story of coffee and conversation with Miss Mildred, and insisted her assessment of the boundary line location was correct. His devotion to his future former neighbor was so staunch, in fact, that James stated emphatically and with increasing ire that the buyer’s survey was incorrect, and that was that.

With emotions at a fever pitch, the buyer’s attorney ordered his own survey of the questionable property line to check the work of the prior surveyor. Lo and behold, the lines matched to a tee.

Finally seeing the writing on the wall, James, the real estate professional, agreed that perhaps the buyer’s request to relocate the fence was reasonable, and hat in hand he trekked over to Miss Mildred’s house one last time to deliver the news. An eminently practical woman, not to mention a frugal one, Miss Mildred politely agreed that two surveyors could not possibly be wrong, and in fact perhaps it was her memory that had gotten a little fuzzy after all these years. Work soon commenced to relocate the fence, and the closing happened without further ado.

The moral of the story is that fine old neighbors can be a treasure trove of community knowledge, not to mention hospitality.  Unless, however, they are licensed surveyors, their insights on the precise location of boundary lines and other technical matters best be regarded as anecdotal, and leave the measurements and legal opinions up to the professionals.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

dunlapmoran.com

Would You Like Fries With That?

Castle frontWe’ve all been there: that crucial moment of decision when faced with an option that can add cost (Leather upholstery? Carpeted floor mats? V-8 engine?), and even calories (French fries? An extra scoop of ice cream? Bearnaise sauce?).

Thanks to the US government’s consumer protection regulations, buyers who finance their homes using mortgages are now advised that owners title insurance coverage is “optional.”  Buyers who read their closing disclosures closely are keying into this description, and beginning to wonder whether they actually need such coverage, especially since it is spelled out as an extra cost item.

The short answer to this query is YES, but know that I am biased; our firm issues the title insurance policy.

The purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past.  To achieve this, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.

Mortgage companies require a lender’s policy of title insurance for their benefit in connection with closing, therefore the description of the owner’s coverage as “optional.”  The lender’s policy doesn’t do a thing for the homeowner.  It only insures that the mortgage is a first lien.

The lender, of course, would be concerned IF the buyer lost title to the property, but only WHEN that occurred. The lender would be concerned IF they found out there is a judgment or municipal lien ahead of their mortgage in lien priority, but only WHEN the mortgage is in foreclosure.

Put another way, the lender gets concerned once the tragedy has already happened. An owner is concerned before it gets that far.

Since the title policy is an indemnity contract for losses, the mortgage company must suffer a loss before they actually have a claim under the lender’s title policy. Therefore, they must proceed to foreclosure, sell the property and obtain less than the debt due on the loan. By that time the owner has been ejected from the property.  And, without an owner’s policy, a buyer is not covered and must pay someone else’s debt.

Given these risks, why is owner’s title coverage  now being considered “optional,” and why do lender’s title insurance policies all of a sudden seem so expensive?

Under Federal rules, the lender is required to lump a majority of the title insurance cost into the lender’s required coverage.  This is basically opposite of what Florida law provides, i.e., the bulk of the cost of the title insurance is associated with the owner’s policy, and the cost of the lender’s coverage is an incremental addition.

So, while the substance of what title insurance coverage is hasn’t changed, the disclosure rules relating to its costs have, leading to confusion and concern by consumers feeling like they’re being upsold for something they don’t necessarily need.

In such a case, the old adage of “penny wise and pound foolish” certainly applies, and an informed consumer should not feel guilty about incurring the incremental cost of the so-called “optional” owner’s title insurance, especially if he or she considers the protection of their substantial real estate investment a #1 priority.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

dunlapmoran.com