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PaperclipPerfector  1d ago (text post)   557 thread views

Friday Fun Thread for October 4, 2024

Be advised: this thread is not for serious in-depth discussion of weighty topics (we have a link for that), this thread is not for anything Culture War related. This thread is for Fun. You got jokes? Share 'em. You got silly questions? Ask 'em.

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Title insurance is a scam. For every $1 that a title insurance company collects, only 5 cents are ever paid out in claims. Other countries (not the US) have central land registries and dispense with title insurance altogether. Title insurance acts as a tax on every real estate transaction.

So... how do I get in?

I worked as a title attorney for a decade. It's not a scam. Most of what you're paying for isn't to theoretically pay off future claims, but to pay for work done up front to prevent future claims. This requires them to send someone down to the courthouse to gather all of the title documents, which are than sent to an attorney who looks for issues and drafts a list of exceptions that the policy won't cover. If the exceptions are minor things like utility easements and the like that don't really affect the value of the property, the company will write the policy. About a third of the time, though, there are major issues that require the insurance company to do further curative work before they'll move forward. The reason such a small percentage goes toward paying out claims is because the vast, vast majority of your premium is spent on getting assurance that there won't be any claims.

Now, theoretically you could forgo the insurance and research the title on your own, but this will inevitable cost you more than just getting the damn insurance because you're now paying the full hourly rate for an attorney who may or may not have any significant experience doing title work, whereas the insurance company has an attorney on its payroll for a lot less, and this guy does nothing but titles. And they'll also be able to delegate a lot of the legwork to other staff, who also do nothing but titles. So you're paying less for a superior product. Theoretically you could also do the research yourself but I highly, highly would not recommend even thinking about even attempting this. Even having spent ten years doing titles that were much more complex than typical residential real estate transactions, there's no way in hell I wouldn't buy title insurance. I've seen too much.

Other countries (not the US) have central land registries and dispense with title insurance altogether.

The problem there is that we would have to essentially run a full title for all land going back to patent. Most title insurance companies only do a 60 year search, because claims beyond that are rare enough that occasionally having to pay one isn't a big deal. But it becomes important if you're making ironclad assurances. You could theoretically get around this by passing a marketable title that acts as an effective statute of limitations on claims, but you stil don't avoid the basic problem: It would still be really expensive. How long and how much do you think it would cost to run full title on all 585,000 parcels in Allegheny County? You're probably talking billions, when you consider that a lot of these are going to be industrial and commercial properties that have much more complex titles than a simple residential subdivision lot. Rural counties have fewer parcels, but rural work poses its own problems; those titles are almost never easy. Then there are the associated costs of curing all those titles (a buyer can always walk away), developing and implementing the system, and dealing with the inevitable lawsuits that follow. I did a lot of work in Ohio right when oil and gas was starting to take off. The state had passed a dormant mineral act that sought to simplify things: Rather than having to track down the innumerable hard-to-find heirs of someone who severed a mineral interest in 1919 and then forgot about it, any interest that hadn't seen any action within the past 20 years would merge with the surface. Seems simple enough on its face. This led to a decade of wrangling and counting, with the Ohio Supreme Court getting involved on several occasions, to determine when an interest is actually terminated. We basically had to hold off on interpreting it for a while while the cases worked their way through the courts. I doubt the wholesale termination of old surface interests would be that much different.

I hate being "let me explain how to fix this industry which I know nothing about" but this is themotte so here goes.

Why, instead of doing all that work, doesn't a title insurer simply collect the payment and not do any work? If the current claims payout is 5%, maybe now it goes to 10%. Complicated mineral claims? Pschaw. I'll only do title insurance for houses and apartments.

I wouldn't rule out that a lot of insurers are stupid and lazy and this is their basic process anyway.

How long and how much do you think it would cost to run full title on all 585,000 parcels in Allegheny County?

Presumably you don't built the registry from scratch. Just every time someone "runs title" it goes into the database and the next time someone runs title it just pulls the record for a flat fee of $50 or something. That said, I do acknowledge that the government fucks everything up so it probably would be some horrible boondoggle.

The problem there is that we would have to essentially run a full title for all land going back to patent.

Would you? If you're the state, you can simply make it so that "in fifteen years, we will switch to a central registry. If you think you have a claim to this land, contact us before ten years from now, or you lose it".

And even if not, it's a one time payment that permanently does away with 'running titles', so it's still probably worth it in the long run.

Tangential, multifamily housing lobbyists oppose government lease registries. But if we had them, even at state levels, it would massively reduce squatting. As is, in many jurisdictions, squatters exploit that law enforcements considers it a civil matter, until the formal eviction process is completed, and won’t intervene.

One example of the requirements is offered by New Jersey Statutes title 17 chapter 46B. (Different states will have different requirements.) Right at the top, there's a minimum capital requirement of 750 k$.

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