The Title Insurance Scam

If you’ve ever purchased a house, you know about title insurance.

And you know, deep in your heart, that it’s a scam.

Title insurance is something you must purchase – you have no choice – to ensure that the home you’re purchasing is actually owned by the person who’s selling it to you.  You’re buying insurance that the people who own the house actually do own the house and have the right to sell it to you.  The seller buys title insurance to assure the buyer that he/she actually owns the house but the buyer also purchases title insurance to assure his/her lender that the house for which the lender is putting up money is actually owned by the people who are buying it.

It all, it seems to The Curmudgeon, should be the seller’s expense, or even the realtor’s, but not the buyer’s.  “You want me to cough up my life savings to buy your house? Okay:  prove it’s yours.”

But that’s not our subject today.

The Curmudgeon has never understood why the cost of business entertainment is tax-deductible

A little while back – Curmudgeonese for “Oops, this one accidentally slipped to the bottom of the pile” – the New York Times published an article about title insurance.  The real subject of the article was about the buckets full of money title insurance companies spend to entertain realtors to ensure that those realtors steer their buyers to their title insurance companies.  There’s nothing wrong with title insurance companies spending as much as they want to drum up business but there’s everything wrong with those entertainment expenses being tax-deductible for the title insurance companies and the rest getting baked into what you pay for title insurance.

Which, it turns out, is a lot.

The article pointed out, for example, that if you buy a $500,000 home in or near New York City and make a down payment of 20 percent, title insurance will run you about $2700.

For a modest row home in The Curmudgeon’s old neighborhood in Philadelphia, which sells for about $150,000 today, title insurance would costs about $1300.

If The Curmudgeon and Mrs. Curmudgeon were to sell their house for what Mrs. Curmudgeon believes it to be worth – dream on, sweetie – title insurance would cost the buyer about $1800.

But it doesn’t have to be that way.

Apparently.

Because that same New York Times article offered the following revelation:

Not every state is like this. In Iowa, for instance, the state government took over the title business decades ago, and it charges a fraction of the price in New York: $110 for a residential purchase up to $500,000, according to the state.

So unless you live in Iowa, you have to ask yourself: why aren’t the people I send to my state capital to look out for my interests doing this for me?  Why do they allow me, my families, and my neighbors to suffer from this scam?

 

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Comments

  • poppopchronicles  On January 1, 2019 at 7:46 pm

    Such a scam. I have bought and dold several properties over the years, and always felt ripped off by the title insurance fees. More states should follow Iowa’s lead.

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