The purpose of title insurance is to protect you, the home buyer, from ownership disputes caused by title defects. Many financial lenders require buyers to purchase title insurance.
But do you need title insurance if you buy with cash?
In short, the answer is yes. Regardless of your payment method, problems with your title can still arise. So, you should plan to purchase title insurance on every new property you purchase; it is the safest means of protecting your investments. And arguably, since you are dedicating tens of thousands of dollars of your own finances into this new home, the purchase of title insurance is even more critical to protecting your investment.
However, there are some subtle differences regarding title insurance when paying with cash. These can be found in the two primary types of title insurance: Owner’s Title Insurance and Lender’s Title Insurance.
Owner’s title insurance policies provide coverage for you as the purchaser of a new property; lender’s title insurance policies provide coverage for the financial lenders. The latter policy is typically the one that lenders require their buyers to purchase, but since you will not have a financial lender when paying with cash, neither you nor the seller will have to pay for that policy.
In the event you aren’t paying with cash, it’s customary in several parts of the country for the home seller to pay for owner’s title insurance; so, there is a chance you will not have to actually pay for any title insurance yourself. You should conduct due diligence to ensure you’re receiving a quality policy.
If you live in an area where sellers are not required to purchase the owner’s title insurance, you can still negotiate with them to pay for some or all of your plan. When you are paying with cash, this can be especially useful during buyer’s markets.
At the end of the day, paying with cash simply removes some obstacles and speeds up the home buying process. Plus, sellers generally prefer this channel and may be more inclined to help with your title insurance.
For help with buying a home with cash, contact one of the title and escrow specialists at Plymouth Title Guaranty Corporation.