Friday, July 12, 2002

Home title insurance becoming common

Buyers cautious after Erpenbeck

By Ken Alltucker,
The Cincinnati Enquirer

        News of the Erpenbeck scandal has prompted Tristate home buyers to buy their own title insurance policies in record numbers.

        Although no overall figures are available, Cincinnati-area title agents say 20 to 50 percent of all purchases are now sold with an owner's title policy, a marked change from just a few months ago when consumers bought just the mandatory title policies for their lenders.

        Buyers cite the troubles of Erpenbeck customers when purchasing owner's policies. New-home purchase contracts in use across the Tristate also now require buyers to initial a section recommending owner's title insurance, even though it remains optional.

        “There is probably not a closing I've attended or conducted in the last month or two when at least one of the parties hasn't mentioned the name Erpenbeck,” said Chip Brigham, owner of Buckeye Land Title Co. in Delhi Township and Milford.

        Mr. Brigham now sells owner's policies for about half of all customers at real estate closings. “It has just been dramatic,” he said.

        The Erpenbeck debacle has left some homeowners without clear titles to their homes and has triggered dozens of lawsuits by banks and contractors who are owed millions. The FBI is investigating whether the Edgewood-based home builder embezzled mortgage checks that were supposed to pay off construction loans.

        Experts say consumers are beginning to realize they have little protection when purchasing homes. No government agencies in Ohio or Kentucky regulate real estate closings, but lawmakers in both states plan to draft new laws to close legal loopholes that allow unscrupulous agents to get away with fraud.

        The price of title insurance varies. For example, it costs $438 for lenders and $754 for owners on a $150,000 house purchased with 10 percent down. The insurance, however, is sold at a significant discount if both types of coverage are bought simultaneously.

        Dan Orner, who co-owns First Title Agency, said Greater Cincinnati is rapidly becoming an area where owner's title policies are common.

        “We are seeing record numbers,” Mr. Orner said. “We're seeing a shift in the market. Realtors are much more inclined to advocate or suggest it.”

        The Cincinnati Area Board of Realtors recently approved changes to standard contracts. The new language stresses that lender's title insurance, which homeowners must buy for their lenders, doesn't protect home buyers who are encouraged to “inquire about the benefits of title insurance.”

        Buyers are also required to initial the paragraph explaining the role of title insurance 1/2ndash 3/4 an effort to ensure the paragraph isn't lost in the blizzard of paperwork at a typical property closing.

        Some title agents are skeptical that a simple contract change will result in a large increase in insurance policies.

        “I think it's the individual agent, by stressing that clause, that is really critical,” said Charles Cain, owner of Insured Land Title.

        In other cities, such as Cleveland, it is customary for sellers to purchase owner's title insurance for buyers.

        Title insurance protects an owner's equity against title defects or challenges up to the amount of the policy. Title challenges are rare but can be devastating and result in home foreclosures.


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