Auction Property/GWD vs SWD/Title Insurance

[Unregistered]

Hi George,

What do most investors who buy a first lien at an auction do about title insurance? The Trustee's Deed is obviously a Special Warranty Deed. If the investor were to flip the property, most buyers would require a General Warranty Deed. In that case, I would think that the investor would be ill advised to not purchase an Owner's Policy. Do many investors take advantage of the Texas Title Insurance Rate Rule R-21 which provides a 30% discount on simultaneous policies? Or do most people just purchase a policy outright after the auction?


Regards,

J

[George Roddy, Jr.]

J,

Most investors who buy "on the steps" typically get a title opinion. They either research the records themselves or pay a local abstractor to research the liens and encumbrances that cloud the ownership and title. Most buyers do not care if the deed is conveyed with a Special or General Warranty deed. As long as the title company will insure title, the buyer is covered.

What is the difference between the 2 types of deeds?

The special warranty deed is not nearly as protective of the buyer as is the general warranty deed. The grantor of a special warranty deed conveys the property with two warranties:

1. The grantor warrants that they have received title.
2. The grantor warrants, unless noted specifically in the deed, that the property was not encumbered during their period of ownership.

The grantor of the special warranty deed, in effect, only warrants the title against their actions or omissions. They warrant nothing prior to their taking title. If specifically stated in the deed, other warranties can be conveyed. Special warranty deeds are frequently used by executors, trustees and banks.

Currently, every bank (REO property) will only offer a Special Warranty deed to convey ownership. The key to protection is "title insurance".

On the steps, no 'title insurance" is offer, thus you better do your research or pay someone who know what their doing.

FYI- Not that you’re interested, but Roddy.com offers a live "Title Research & Examination workshop every month in the DFW area. We also offer this course ONLINE, you get unlimited access for 30 days with workbook and actual case studies.

Good question,

George Roddy, Jr.

[Will Crozier]

On this subject-

Is there any reason an investor who fixes/flips a property acquired "on the steps" cannot offer his future buyer a very conventional buying experience? By this I mean a full title insurance policy, a deed that will not seem too out of the ordinary, etc?

In the same vein, is it possible to buy title insurance for a property you buy at auction and you plan on staying in it for some time? Not because you don't trust your title research, but to protect against errors on the county level, or other unforseen issues that arrise? (forgeries or other issues as seen on this list https://www.fntic.com/21Reasons.asp )

Thank you for any input that you have!!

[George Roddy, Jr.]

Will,

There is NO reason when you offer the property after you've fixed the house to sell the property conventionally and offer/pay for the title insurance(TI). There is really no difference. You didn't purchase insurance when you bought the property, but the buyer and buyers lender will require TI when you sell.

If you're going to hold the property, you absolutely can buy TI, but why would you? The only reason you would need to purchase a title policy is if you were going to refinance or get a HELOC.

George