I know there’s been a few posts on buyers’ title insurance and general consensus is “pay it, like all insurance you don’t need it till you need it”. In most situations, I largely agree with that assessment and think it’s a great idea for the right price, but in this particular Texas land purchase… I am drawn to skip it. Please read the below and let’s have a convo, title insurance is beginning to feel more and more unnecessary every day especially at the prices that Texas has mandated in an anti-competitive manner.
Land / purchase background:
Subdivision: 500 acres subdivided into roughly 100 5-acre lots. 90% sold. Ag exempt for tx taxes I am paying cash for 1 of the 5 acre lots
Why, on this particular lot, I am hesitant to hand over 2K for seemingly not much coverable risk.
The previous seller sold it to the LLC that is subdividing it under Warranty Deed With Vendor’s Lien (basically the gold standard of deeds considering the seller takes all the risk -> indicates a hell of a high degree of certainty the deed is clean). Exclusions: The title company has excluded what I imagine are the highest risk scenarios. Shortages of boundary lines Any, and I quote “Any defect, lien, or other matter that may affect title to the land or interest insured, that arises or is filed after the effective date of this Commitment.” Is this even insurance if it doesn’t protect against the quoted??? “all improvements or repairs to the property are completed and accepted by the owner, and that all contractors, subcontractors, laborers and suppliers have been fully paid, and that no mechanic’s, laborer’s or materialmen’s liens have been attached to prop”– This exception is what I consider the highest risk and they don’t even insure against it, as the roads are being constructed contractually within a year after I close and that could fall in my lap if something were to happen. Almost all lots have gone through the same title company. Since this is subdivided land, the record checks run for those lots would apply to my own (aka the property search came up clean).
With the above, I feel like this title policy is almost useless at the Texas mandated price. For sake of example, the lender policy is $100 (for 50% of the purchase price if I weren’t paying cash), which to me is likely the appropriate risk-adjusted cost of title insurance in this age of digitized searches (see Iowa and other states for comps). However, the buyer’s title is coming in north of $2K for the land, likely around $8-10k to insure my future residence as well.
I think of this on a bell curve of risk and ~$100 is arguably the free market value of this title insurance given payout rates of the title industry for an “average” risk house/ property (if Texas wasn’t propped up by special interests in this particular area). Texas title companies paid out a little over 1 cent on the dollar for their insurance and that doesn’t even capture the # of payees that actually went to (which is considerably under 1% by deductive reasoning).
My argument here is that the fact that this is a new subdivision with new plats, a warrantied deed prior to sale to the current subdividing owner, title search complete for 99 other lots being sold along with mine on the same land, along with the exceptions to the title policy (likely the heaviest weight for my hesitation); this title insurance is looking to be worth more like $1 compared to $2000 and I’d be better off skipping this “insurance”.
Would love this group’s feedback/conversation. As I said, I can generally get behind a title policy but this particular set of circumstances has me really leaning away from the status quo.