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Title Insurance... do I need this for my HGVC purchase?

Hobokie

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TUG Family,

I got (what I believe is) a great deal on a HGVC at Elara (Platinum, Studio Plus) via eBay. The seller was Sumday Vacations. They charged me $299 closing/transfer fee (and I am expecting to receive a $609 bill from HGVC for membership activation when the transfer is complete).

Things are going smoothly, but I am signing my closing docs and I am confronted with the ugly disclaimer "... no responsibility to the undersigned purchaser for the status of the title to the property being acquired, or for any loss by reason of the complete or partial failure of title"....

It feels like this would be something to purchase for a "regular" timeshare vs one related to a club like HGVC... what do you guys (and gals) think? Should I purchase title insurance?
 

Great3

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I say it depends on how much it will cost you total if you were to lose the deed to your HCVC vs. how much the cost of title insurance is.

On my HGVC, I paid for it to protect my > than $9000 purchase. Title insurance was about $250 for that. I have another timeshare that I paid about $500 total for the deed, so I forgo title insurance, I figured if somebody wants to claim title to that timeshare, they can have it, I won’t cry over the lost.

Only you can decided what’s best for you.

Great3
 

alwysonvac

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cas42021

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If using a closing company to execute the transfer and handle the escrow between seller, buyer, and HGV, wouldn't this be the responsibility of the closing company?

I could see this being recommended if the transfer was solely between 2 private parties, but why else use a closing company if they are not on the hook for due diligence regarding the title status?
 

Great3

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If using a closing company to execute the transfer and handle the escrow between seller, buyer, and HGV, wouldn't this be the responsibility of the closing company?

I could see this being recommended if the transfer was solely between 2 private parties, but why else use a closing company if they are not on the hook for due diligence regarding the title status?
The title company may not do a title search if you didn't purchase title insurance. And if they did, they absolve themselves of all liability if you didn't purchase title insurance. That's just the point of title insurance. It's the title company themselves or related parent company selling the title insurance, so when you use them for a closing, they push title insurance or say you accept all the risk yourself for not taking title insurance when they offered it. Try suing the title company when you have title problems, and see how far you get with that :).

Great3
 

cas42021

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The title company may not do a title search if you didn't purchase title insurance. And if they did, they absolve themselves of all liability if you didn't purchase title insurance. That's just the point of title insurance. It's the title company themselves or related parent company selling the title insurance, so when you use them for a closing, they push title insurance or say you accept all the risk yourself for not taking title insurance when they offered it. Try suing the title company when you have title problems, and see how far you get with that :).

Great3
I don't know, it still kind of sounds like a sucker bet to me. I wasn't offered title insurance by my buyer's agent or closing agent handling the transfer..but every document I signed and all the verbiage on the contract of my sale was dependent on the title being clear, no lien, no taxes or dues owed, etc. If that later ended up not being the case, you bet your ass that company would have an issue. It would break the covenants of the contract, making the deal null and void.

I would assume that to be in the closing company's or seller's best interest, due to the entire deal/contract falling apart if something came back incorrect. Not the buyer. The buyer can just walk, and their bank could go after the funds if needed.
 

Great3

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Most title won't ever have a problem, especially if there is only been only one owner, that purchase direct from the developer. So, yes, I understand what you are saying, all the loans, taxes, liens, etc should have been clear, that pretty much you are paying for title insurance for nothing. But besides all those, title can become a problem when some else claims they have a right to the property and didn't agree to sell. For example, a single person purchased the property, but later marries and put the property into the marriage community (by certain actions). Afterwards, that person sells (and they may even gotten divorced where the spouse was awarded the property, or not); the spouse of the person may laid claim the to title later after the sell. All these things the title company can't possibly find out about until it's too late.

As far as walking, if you paid in full in cash already, than that money is long gone, good luck recovering it when you don't have clear title. Now, if you have a loan, yes, you can walk, but you can bet the bank will still go after you for repayment of the loan, whether or not you still have title to the property.

So yes, title insurance is probably not needed ever, and for the most part, I agree and view it as a sucker bet also, but I rather be the sucker than deal with any problems later, even though I know 99.99% of the time that I am paying for nothing. To each his own!!! Only you know what is right for you!!!

Great3
 

dayooper

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We bought title insurance when we purchased last summer. It was piece of mind. Like @Great3 said, there is very little chance of issues. We saw it as we were dropping $4500 on the unit, $1000 on Hilton fees and another couple $100 on closing costs, we thought the $375 was worth it for us. If we were spending less, I don’t think we would have done it. We wanted to know that we weren’t going to lose that money over something we could have prevented.
 

CalGalTraveler

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If there is a typo on the deed such as the location of the unit filed by the third party closing company, this may not get discovered until 10 or 20 years later when you sell. This will cloud the title and you will not be able to sell, and the developer won't accept a deedback. Your prior owner is long-gone (maybe dead) and the third party closing company, a small company may not still be in business, or if they perceive a large lawsuit, will fold up their tent.

You will be left paying MF until you die because this will be less expensive than hiring lawyers to go after all these people who have no money to compensate you for your legal fees. The developer will send their big-gun lawyers after you to continue MF payment (you have been paying the MF for the past 20 years and using it so you are not out of the woods). Or you can walk and accept the credit hit.

To me, the sucker is the person who was trying to save $200 - $400 by not buying title insurance to avoid this potential hassle. It is a small price to pay to sleep at night. However it all depends on your tolerance for risk.
 
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cas42021

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I appreciate the thread, and opinions. I think my perspective on this has changed and am 2nd guessing my options. I inquired about this with my closing company, and their response follows:

"Is title insurance included in my closing costs? There was never an itemized description of what those costs cover, provided to me. I am assuming so, since I was never offered the option to buy any. Or, perhaps the seller has purchased it?

Either way, I insist on having it for this transaction. The fact that the seller and her husband were both on the deed when they purchased this interest, and the husband has since passed. I know if not handled and reported properly this can create a massive problem for me as the new owner, down the road.

Can you please advise what protection I have against any issues with the title of this purchase going forward?"

And thier response..

"I have probably purchased 50 timeshares over the past fifty years and have never had title insurance.

The developer has title insurance on the structure and the path that follows the building from inception to finalization.

In this situation the affidavit of death of spouse along with the death certificate is recorded. Then the deed is recorded.

We can stop the transaction and order title insurance. The costs will be about $400.00. It would take 4-5 weeks to complete.

There should be no issues going forward as long as the recording goes well and it will take a few days for that.

Please advise."


After all this, I'm leaning toward stopping the transaction and going for the insurance..
 

CalGalTraveler

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@cas42021 it is good you are in a position to ask about this. I was talked out of title by a TS broker with a similar response i.e. "I sell all the time without title ins." and I now regret going with his recommendation. This was not a small transaction. My situation was similar to yours in that one of the spouses died and they had to file with the death certificate but this complication was not the real issue and the delay actually helped in the end because it prompted me to review the closing documents.

The real issue came in when I requested the prior deed to the property and found that the TS location information was incorrectly entered by the 3rd party closing company and didn't match the prior deed issued by the developer (we also found several other typos that were troublesome but would not cloud the title). I then went through everything with a fine tooth comb (what a pita!) and hired a lawyer to review.

In our case it was too late to add insurance because escrow had closed and the deed had already been filed with the county (albeit incorrectly). Fortunately the 3rd party closing company cooperated and immediately corrected and we were able to file a corrective deed with the county while we could still obtain the surviving seller's signature on the corrective deed transfer. (They weren't happy about having to redo their work, however these were typos created by them - very sloppy work!)

Title insurance would have discovered these issues in their due diligence and corrected them. If not, they would correct later. My lesson: Buyer (and seller) beware when it comes to 3rd party closing companies; although they know which forms to fill out, they are conducting a high volume of low cost transactions with clerks filling in the blanks, who may not be double-checking their work; a licensed professional also may not be reviewing the work. Brokers are not reviewing the closing documents and may talk you out of it because it makes the closing (and their commission) happen faster. If you forgo insurance, read your docs with a fine tooth comb and compare to the last deed issued by the developer.
 
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cas42021

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@CalGalTraveler I couldn't agree more. It now makes sense to me after reading through some research and hearing a couple horror stories..I am using a recommended broker and closing company from this site, however there have already been several typos and things missing from the contract I signed etc along the process. It happens, I get it, but I don't want an honest mistake like a typo or an issue with how something was filled out or not reviewed properly, to cause me trouble down the road if I want to sell.

I have a very inexpensive contract, and was looking to avoid any added costs, especially something like title insurance..but a few hundred bucks now seems like it could save me thousands later.

Thanks all!
 

Hobokie

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Well I'm glad I asked haha! Some really good points brought up on this thread!

I am still question though... for a HGVC specifically, is there truly much risk? After this thread I feel like I would definitely purchase for a "traditional" timeshare or a purchase exceeding a few thousand dollars, but a 3400 annual Hilton...??? Like wouldn't Hilton make sure that the transfer is legit?
 

Great3

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I am sorry to inform you, but Hilton is a traditional timeshare in the sense that you have a deed associated with your purchase, so it's traditional real estate ownership with the timeshare flair. Worldmark is truly a club in the sense that you don't own any properties, but in the case of HGVC, you still own a part of the property. Even with a cloudy title, ownership can still transfer as long as buyer is willing to forgo title insurance and take the same risk themselves. However, no title company will issue title insurance for any cloudy title, and from that point on. So, besides protecting your deed, it helps clear title to sell.

Again, it's the risk you have to decide whether you tolerate.

Great3
 

CalGalTraveler

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I would expect that Hilton will only conduct due diligence when it is time to sell back to them or take the deedback. By then it could be too late. If they are getting paid their fees and MF why ask questions. Besides, is it their business to get involved with someone else's deal once they waive ROFR?
 

csodjd

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For what it's worth, I'm in escrow right now. I just received my "Estimated Buyer's Settlement Statement." It includes a line, "CLTA Standard Owner's to Old Republic Title & Escrow of Hawaii" with a charge of $100. That's the cost for the CLTA title insurance policy. This is a $29,000 purchase. $100 for Title insurance is a no-brainer to me. I was initially quoted $300 for title insurance.
 

cas42021

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What happens if the company providing title insurance goes out of business? Curious if that would make a difference 5, 10, 20+ years down the road? Or is it a one and done, the service was performed on x-date, and you are clear of any trouble with the past and current deed moving forward..
 

Great3

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If the company providing title insurance goes under, you are out of luck. Title problems can arise at any time, even if the title insurance company folded. However, mostly likely your title is good and clear, if done properly, else the title insurance company won't sell you title insurance. The only worry you have down the line is undisclosed heirs / spouse, etc. that may lay claim to title, but that usually don't happen.

Just stick with the big title companies, and you should be fine.
 

csodjd

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If the company providing title insurance goes under, you are out of luck. Title problems can arise at any time, even if the title insurance company folded. However, mostly likely your title is good and clear, if done properly, else the title insurance company won't sell you title insurance. The only worry you have down the line is undisclosed heirs / spouse, etc. that may lay claim to title, but that usually don't happen.

Just stick with the big title companies, and you should be fine.
You elude to something people don't think about. Before they sell you title insurance, they do a thorough title search and review for any signs of possible issue. They can't necessarily find/know everything, but you can at least be sure that by buying title insurance there is clean title according to the currently known/recorded information.

Most states have backup for an insurance company that goes out of business. Not sure if it reaches to title insurance, but it probably does. So chances are you'd still have some protection.
 

CalGalTraveler

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You elude to something people don't think about. Before they sell you title insurance, they do a thorough title search and review for any signs of possible issue. They can't necessarily find/know everything, but you can at least be sure that by buying title insurance there is clean title according to the currently known/recorded information.

Most states have backup for an insurance company that goes out of business. Not sure if it reaches to title insurance, but it probably does. So chances are you'd still have some protection.
This is precisely why I would pay for title on a property that has changed hands after the developer sale - even on a free deed. More opportunities for typos and errors that could cloud the deed and prevent me from disposing of it in the future.
 

Jason245

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This is precisely why I would pay for title on a property that has changed hands after the developer sale - even on a free deed. More opportunities for typos and errors that could cloud the deed and prevent me from disposing of it in the future.
Errors on deed that prevent me from disposing of it also mean it was never legally transferred to me.. win win on disposition. I basically tell hgvc that the state says it isnt my property any more.. no more mf from me cause I cant legally use it.

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CalGalTraveler

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Errors on deed that prevent me from disposing of it also mean it was never legally transferred to me.. win win on disposition. I basically tell hgvc that the state says it isnt my property any more.. no more mf from me cause I cant legally use it.

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Nice try but I am not sure that would legally hold up in court against the big-gun developer lawyers if you paid MF over several years, signed purchase docs with intent to purchase, paid transfer fees to the developer, and used the unit. The developer received all these docs when you went through ROFR.

It would be less expensive to continue paying the MF and using/renting than paying lawyers to fight the developer's lawyers. Or paying a real estate lawyer/title company to clear the title if you can find the seller and convince them to sign a corrective deed. Or you could walk and take a credit hit.
 
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