Expert: Ray Beggs - 4/7/2006

Question
Explain what exactly is title insurance and is it necessary for an all cash deal to buy my property which I have had for 26 years and is paid for.  A title search was done by the buyer.  Now we have conflicting statements about why it is necessary or not.

Answer
Hi Estell,

That's a good question. Technically, I don't believe title insurance is required in California if the deal is all cash. Lenders require title insurance and since most deals in Calif. are done using a lender, most of the time title insurance is a requirement before the close of escrow.

Here's the problem, though. Let's say that the title examiner for the county that the sale is taking place in checks the title before it is deeded over to your buyer and determines that there are no problems and completes the recording. Lets say that the examiner misses something that he/she should have caught that could effect the title and that that problem is not found for 10 more years when your buyer goes to sell the house. There is no title insurance so the buyer is going to have a problem. It makes no difference that it's a mistake of the county. They aren't going to pay anybody off like a title insurance company will. They'll just say sorry and go to lunch.

Personally, I would NEVER buy a piece of property without title insurance. It's just too big of a financial risk. Look at it this way, the banks require borrowers to get it for a reason. They don't want there to be any potential problems on such a large asset.

Good luck with your sale,

Ray