noblepa wrote:In the US, tltle insurance is often required by a lender. However, many buyers have a misconception about it. It protects the LENDER, not the BUYER. If I buy a house with a mortgage, and someone comes along and proves a superior title, he gets the house, the lender collects on the title insurance, and I'm left out in the cold, probably losing my down payment, closing costs, etc.
I think that is not the correct scenario. The title insurance company is the one who is going to be the one left out in the cold if they insure a title, fail to identify a senior creditor and then fail to satisfy the senior encumbrance. Both the lender and the purchaser of the property will have causes of action against the title insurance for breach of contract. I have dealt with too many title insurance companies who, when dragging their feet on a claim I filed with them, got very nervous when I said that I would have to notify the home owner that we would be pursuing our senior encumbrance against their property and they would have to go court. The insurance lawyers at that point immediately made some firm commitments to cutting a check in lieu of me paying a visit to the homeowner(s).