Is title insurance necessary if I am planning to purchase an apartment with all cash and no mortgage in New York City?
Chances are you won't need title insurance—but don't take that chance, our experts say. Title insurance protects homeowners in the event that there are outstanding liens, open permits, or issues with previous owners of a property; lenders may require it of condo or townhouse buyers who are taking out a mortgage.
But even for those who are buying all cash, title insurance is a good idea, even though it's not a legal requirement.
"Like all insurance policies, the insured hopes to never have to make a claim under the policy, and title claims are exceedingly rare," says Jeffrey Reich, a partner at the law firm of Schwartz Sladkus Reich Greenberg Atlas. "Still, it is strongly advised that purchasers obtain title insurance, which will insure the purchaser’s interest in the property and minimize are any title issues, which complicate a future sale of the property."
Keep in mind that it's for your own protection. And once you purchase coverage, the title insurance company will do research on your behalf to check for any outstanding liens or claims on the apartment. The policy will cover you should an issue arise; it will also protect you if you decide to refinance at some point and discover there is a lien or other problem with the title.
"While it may feel and seem unlikely that someone will claim to have had a title or a lien from the past, you just never know," says Deanna Kory, a broker with Corcoran. "So it has become somewhat of a necessity, especially for a single-family home or a condominium."
Co-ops are an exception, however, since buyers are actually purchasing shares of the cooperative rather than the apartment itself, so the same principles for title insurance don't apply.
For condo or townhouse buyers, the cost of a title insurance policy will vary depending on the value of the apartment, but it is a one-time fee.
"You can do a search for New York title companies, and there are also title calculators online," says Ami Rosen, mortgage banker with Wells Fargo. "It's a regulated industry, and the cost is calculated based on the purchase price of the property."
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