Your lender requires title insurance to protect its investment. Why shouldn’t you be required to protect yours?
Buying a home is likely the largest financial investment most people will ever make. Yet during the closing process, buyers are routinely presented with a decision that I believe they should never have to make: whether to purchase owner’s title insurance.
In Massachusetts, mortgage lenders ordinarily require buyers to pay for a lender’s title insurance policy. The bank wants to make certain its financial interest is protected against defects in title.
But here’s the irony: **The lender insists on protecting its investment, while the buyer—the person putting up the down payment, making the mortgage payments, and building equity—is permitted to decline that same protection.**
After more than three decades practicing real estate law in Massachusetts, I believe owner’s title insurance should be a required part of every residential real estate purchase.
Why? Because the potential consequences of declining coverage can be financially devastating, and the buyer may have done absolutely nothing wrong.
Consider these cautionary tales.
The Mortgage That Never Went Away
Imagine purchasing your dream home. The closing goes smoothly, you move in, and for the next ten years you faithfully make your mortgage payments.
Eventually, you decide to sell.
Your buyer’s attorney examines the title and discovers an old mortgage from a previous owner that was never properly discharged.
The lender that held the mortgage no longer exists under its original name. Perhaps it merged with another institution, or its records are difficult to locate.
Suddenly, your sale is in jeopardy.
Your buyer wants clear title. The closing is delayed. You may have to hire an attorney to track down the appropriate institution or pursue legal proceedings to resolve the problem.
You didn’t create the problem. You didn’t even know it existed.
Yet without owner’s title insurance, you may be responsible for the expense of fixing it.
**A title defect from twenty years ago has just become your problem today.**
The Heir Nobody Knew About
Consider a couple who purchases an older home that has been in the same family for generations.
The seller inherited the property from a parent. The transaction closes, the deed is recorded, and the buyers move in.
Years later, an individual comes forward claiming an ownership interest in the property.
It turns out that a previous estate was not properly administered, and an heir’s interest was never extinguished.
Now the couple faces a lawsuit challenging ownership of their home.
They may ultimately win. But how much will it cost to defend their title? $10,000? $25,000? More?
Without owner’s title insurance, those legal expenses could come directly out of their savings.
And what if the challenge succeeds?
The consequences could be far worse.
**The buyers paid for the home. They did everything right. But someone else’s mistake now threatens their investment.**
The Contractor Who Was Never Paid
A family purchases a beautifully renovated home. The kitchen is new, the bathrooms are updated, and the property looks perfect.
What they don’t know is that the seller never paid a contractor who performed work before the sale.
After the closing, the contractor asserts a mechanic’s lien against the property.
The buyers had nothing to do with hiring the contractor. They never agreed to pay for the work.
Nevertheless, a properly perfected lien arising from pre-closing work may create a serious title problem.
Now the buyers may face legal expenses and difficulty refinancing or selling the property.
A covered, undisclosed preexisting lien is the type of risk that owner’s title insurance may protect against.
Without that protection, the homeowner could be left dealing with a dispute that should never have become theirs.
The Forged Deed
Imagine learning that someone forged a signature on a deed years before you purchased your home.
The document was recorded at the Registry of Deeds, and subsequent transactions occurred without anyone discovering the fraud.
You purchased the property in good faith, paid fair market value, and obtained a mortgage.
Years later, the rightful owner or an heir challenges the validity of that earlier deed.
Suddenly, your ownership is being questioned.
This is one of the most compelling reasons to purchase owner’s title insurance.
A forged deed can appear perfectly legitimate in the public records. Even a careful title examination may not reveal the fraud.
An owner’s policy can provide protection against covered title defects arising from forgery.
Without it, you could face an expensive legal battle over a home you believed you owned.
Why I Believe Owner’s Title Insurance Should Be Mandatory
When buyers are asked whether they want owner’s title insurance, many simply don’t understand what they’re declining.
They see another charge on an already expensive closing statement.
They assume the attorney has examined the title, the bank has approved the loan, and everything must be fine.
And in most transactions, everything is fine.
But title insurance isn’t purchased because we expect something to go wrong. It’s purchased because of what could happen if something does.
Think about it.
We require automobile insurance because of the financial consequences of an accident.
Mortgage lenders require homeowners insurance because of the potential financial consequences of a fire or other casualty.
And lenders require title insurance because they recognize that even a thorough title examination cannot eliminate every risk.
**Why, then, do we allow the person with perhaps the greatest personal financial stake in the transaction to decline protection against a defective title?**
I believe owner’s title insurance should be mandatory for the same fundamental reason lenders require their own coverage: the financial consequences of an undiscovered title defect can be too significant to ignore.
The Bank Protects Its Money. Who Protects Yours?
Let’s consider a typical Massachusetts home purchase.
A buyer purchases a home for $700,000, makes a $200,000 down payment, and obtains a $500,000 mortgage.
The bank requires a lender’s title insurance policy to protect its $500,000 investment.
The buyer, however, declines owner’s title insurance to save money at closing.
Five years later, a serious title defect is discovered.
The bank has its insurance protection.
The buyer does not.
And the buyer’s exposure isn’t necessarily limited to the original $200,000 down payment. Over time, the buyer may have paid down the mortgage, made substantial improvements, and accumulated additional equity as the property’s value increased.
That entire investment could be affected by a serious ownership dispute.
The lender’s policy does not insure the homeowner’s equity or provide the homeowner with the protections of an owner’s policy.
**If a bank considers title insurance essential to protect its loan, I believe it should be considered equally essential to protect the homeowner.**
But Doesn’t the Closing Attorney Guarantee Clear Title?
No attorney can guarantee that a title defect will never arise.
In Massachusetts, closing attorneys conduct or arrange title examinations to identify mortgages, liens, easements, judgments, and other matters affecting ownership.
That examination is an essential part of the closing process.
But a title examination relies on available records and cannot necessarily uncover forged signatures, undisclosed heirs, recording errors, or every other potential defect.
Even the most experienced and diligent real estate attorney cannot eliminate every possible risk.
That’s precisely why title insurance exists.
It provides an additional layer of financial protection against covered defects, including certain problems that may not be discovered until years after the purchase.
A Small One-Time Premium to Protect a Lifetime Investment
Unlike homeowners insurance, which requires annual premiums, owner’s title insurance is generally purchased with a single premium paid at closing.
The coverage ordinarily continues for as long as the insured retains an ownership interest, subject to the policy’s terms.
When compared with the overall cost of purchasing a home, the premium is often a relatively modest expense.
Yet it may provide protection against legal claims that could cost tens of thousands of dollars to resolve—or potentially threaten the homeowner’s ownership interest.
Of course, title insurance does not cover every possible property dispute. Policies contain exceptions, exclusions, and limitations, and not every lien, easement, or boundary issue is insured.
But the existence of limitations is hardly a reason to go without protection against the substantial risks that are covered.
My Position: Owner’s Title Insurance Should Not Be Optional
I have represented buyers, sellers, and mortgage lenders in Massachusetts real estate transactions for more than thirty years.
And I have come to believe that allowing buyers to decline owner’s title insurance is a mistake.
Most buyers simply do not have the experience or technical knowledge to evaluate the potentially serious consequences of an undiscovered title defect.
They shouldn’t be expected to become experts in probate law, recording statutes, forged deeds, mechanic’s liens, or competing ownership claims before deciding whether to protect their homes.
The law already recognizes the importance of protecting lenders.
**I believe the same protection should be required for homeowners.**
Until that happens, I strongly encourage every buyer to purchase owner’s title insurance.
Because the real question isn’t whether you can afford the premium.
It’s whether you can afford the consequences of an uninsured title defect.
Protect Your Home. Protect Your Investment.
At the **Law Offices of Scott M. Syat, P.C.**, we have been helping Massachusetts buyers, sellers, and lenders navigate residential and commercial real estate transactions for decades.
We believe that a successful closing involves more than signing documents and receiving the keys. It means understanding the transaction and taking appropriate steps to protect your investment for years to come.
If you’re buying a home, refinancing, or have questions about owner’s title insurance, we welcome the opportunity to assist you.
**Call the Law Offices of Scott M. Syat, P.C. at (617) 773-3500 to discuss your real estate transaction.**
*Protecting your interests from contract to closing—and beyond.*
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*Disclaimer: The situations described in this article are illustrative examples of title defects that can arise in real estate transactions and are not representations of specific client experiences. Owner’s title insurance is generally optional for Massachusetts homebuyers, although lender’s title insurance is ordinarily required when financing a purchase. The recommendation that owner’s title insurance be mandatory reflects the author’s professional opinion, not a statement of current Massachusetts law. Insurance coverage is subject to the terms, conditions, exceptions, and exclusions of the applicable policy. This article is intended for general informational purposes and does not constitute legal advice.*