Yes, you need title insurance and a survey. Here is why:
The closing costs on a typical mortgage loan or purchase can seem overwhelming. According to Zillow, the closing costs for a $150,000 home can range from $3,000 to $7,500, with an average falling around $3,700. When you purchase with cash, you will discover that purchasing an owner's title insurance policy is technically optional. So, you might wonder if this is really necessary, or if title insurance is something you can skip.
Here's the short answer to those questions: Yes, title insurance matters. And no, mortgage lenders won't let you skip it.
What Title Insurance Does
To sum up, title insurance protects you from clerical errors, mistakes in property records, or unpaid taxes involving the home you are purchasing. Maybe the past owner of the home hasn't paid property taxes in years. If you buy the home, the government agencies levying those taxes will come after you to pay them — unless you have title insurance. Or, maybe a past seller bought the home with a sister. Maybe these two siblings had a falling out, and the brother sold the home without telling his sister. That spurned relative could come after you for the profits she says she is owed from the sale — again, unless you have title insurance protecting you.
There have been various instances of the clerk of court (land records clerk) improperly indexing or typing names, through no fault of anyone in the chain of title. This causes a title defect that an insurance policy would cover. Title insurance is like most other forms of insurance: You pay for it in the hopes that you'll never need to use it.
Title insurance covers the window of time before your ownership of the home, protecting you from certain claims and legal fees that were beyond your control. Even though it extends backward through time indefinitely, coverage ceases on the date you take ownership. If you decide not to pay property taxes, mortgages, or liens once you're the official homeowner? That's on you.
If you are purchasing using a lender, the lender will require a survey. They may not say it in this language, but they will require "Florida Form 9" coverage on their title policy. The title insurance agent cannot issue a Florida Form 9 without a current survey. The survey must be current and be from a certified Florida surveyor. Even if you are paying cash, you should want a survey. And not a "re-certification" of an old survey, but a brand new survey making sure that they catch any new issues that have occurred since the last survey was completed.
My experience has taught me that there seldom is a reason for a buyer to skip ordering and reviewing a survey prior to closing on a home. In a poll of real estate attorneys, it is estimated that that one out of every one hundred surveys catches a MAJOR ISSUE (set back violation, code violation, encroachment/excroachment) and you'd be crazy to close on a home without getting a new fully certified survey. If there is a major issue, and you purchase without a survey, you are fully responsible for curing whatever defect may be causing the issue. This could include, in the worst case scenario, moving or destroying a structure that was constructed in the wrong place. If the issue remains in place and you eventually want to sell the property, you will only be able to sell to a cash buyer because a lender will not lend on a property with a major survey defect.
How Much Will It Cost?
Title insurance is not cheap. In fact, it ranks as one of the biggest fees buyers will pay when purchasing a property. Please use our instant closing cost calculator, which quotes closing costs and title insurance rates. Surveys in our local area cost approximately $350-$400 for a standard sized property.