Is there an alternative to title insurance?

What you’ll learn (TL;DR)

• An alternative to title insurance is an attorney opinion letter, which is a written opinion on the status of a property’s title, or ownership.

• An attorney opinion letter does not protect against false information in the public records or defects that cannot be found in the public records.

• Only title insurance covers mis-indexed documents, missing heirs, fraud, invalid deed signatures, and other problems not found by a title search.

Attorney Opinion Letters

While nothing protects property rights like title insurance, an alternative product is an attorney opinion letter, which is a written opinion on the status of a property’s title, or ownership. An attorney reviews and analyzes the property’s chain of title (ownership history) and gives an opinion on whether the title is clear or if there are problems that need to be addressed, and whether anything in the land records affects the property like easements An easement is the right to use part of someone’s property for a particular purpose. For example, neighbors may have easements over each other’s property to use a shared driveway. Utility companies often have easements to run utility lines across private property. or restrictions. Many properties have restrictions, or limits, on how they can be used. For example, a property may be part of a homeowner’s association that has use restrictions, like not allowing temporary rentals or limiting the types of animals or vehicles that can be kept on the property. Attorney opinions were widely used decades ago before title insurance became available but were replaced in most states because of the superior coverage of title insurance.

Title Insurance Protects against Hidden Title Defects

The public land records are where deeds and other documents that affect property interests must be filed. Like title insurance, an opinion letter relies on a search of the public records to figure out who owns the property and if there are any title defects like deed errors, missing owners, or liens. A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. However, unlike title insurance, opinion letters do not guard against title problems. While an attorney may be liable for negligence if the opinion letter is wrong, the attorney is generally not responsible for errors that cannot be found in the public records or for false information within the public records. This is significant because one analysis found that almost 30% of losses and expenses from title insurance claims were due to title problems that could not be found in the public records. [1] Examples of matters covered by title insurance that are not covered by opinion letters include:

• Mis-indexed documents. This means that the documents were filed against the wrong property or owner.

• Missing heirs. This can happen when an owner dies and leaves their property to several heirs. If not all heirs sign a deed, the missing heir may have an ownership interest in the property.

• Fraud. A deed may have been forged by a criminal impersonating the true owner.

• Invalid deed signatures. A deed may be invalid if it was signed by mistake or by a minor, a person who is mentally incompetent, or someone who is not authorized to sign on behalf of a business (if the property was sold by a company).

Another benefit of title insurance is that it covers problems that happen after you close on your home purchase, but before your deed is filed in the public records. An opinion letter is valid only through the date the attorney searched the public records. Later matters are not included. For example, after an opinion letter is issued, a child support judgment against the seller may become a lien A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. on the property or the seller could sign a deed to another buyer. Title insurance protects against these things, which means we will fix the problem, pay you for your loss, or hire an attorney to represent you or defend you in a lawsuit. An opinion letter does none of these things.

Deed Fraud Is a Growing Problem

Deed fraud is on the rise and in the typical scheme, a criminal impersonates an owner and forges their name on a deed to sell the property and steal the sale proceeds. While a forged deed is void, the true owner often must hire a lawyer and file a lawsuit to remove the forged deed from their title. Some title insurance policies, like the First American Eagle policy, cover this situation and these legal fees. Opinion letters do not provide this protection.

An Example of Title Insurance Battling Deed Fraud

In one real-life example, an owner learned that their vacation home in California had been sold through a forged deed. [2] The owner was protected by a title insurance policy that covered the court costs to cancel the fraudulent deed and restore title in their name. The innocent buyer was also protected by a title insurance policy, which paid them $400,000 for the loss of the property. Neither the owner nor the buyer would have been protected by an opinion letter. If both had declined title insurance, the owner would have had to pay the legal fees to remove the forged deed from their title. Even worse, the buyer would be out $400,000, the amount they paid for the property.

How does the cost of an attorney opinion letter compare with title insurance?

The cost of a title insurance policy varies based on the state where the property is located, the value of the property, and the policy type. However, research found the average cost of title insurance to be 0.42% of the property’s purchase price. [3] [4] For property valued at $318,000 (the average purchase price in the research), the average title insurance premium would be $1,337. A title insurance cost calculator is available here. The cost of an attorney opinion letter varies by provider, but one range is between $695 and $995 for a purchase transaction. [5]

Coverage Comparison Chart – Attorney Opinion Letters vs. Standard Owners Title Policy

	Attorney Opinion Letters	Standard Owners Title Policy
Matters found in title search	Yes	Yes
Hidden title defects (matters not found in public records search)	No	Yes
Matters occurring after date of title search	No	Yes
Forged documents	No	Yes
Incapacity, “Incapacity” means a person does not have the mental ability to do something. For example, an elderly person with dementia may not have the capacity to sell property. incompetency, “Incompetency” means a person does not have the legal ability to do something. For example, a minor child is unable to sell property. or lack of authority of grantors	No	Yes
Missing heirs	No	Yes
Mis-indexed documents	No	Yes
Recording “Recording" is the process of placing a document, like a deed, in the public records. Each county has its own system and requirements for recording documents. mistakes	No	Yes
Unrecorded liens A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.	No	Yes
Clerical errors	No	Yes
Fraud	No	Yes
Defective court proceedings	No	Yes

Title Insurance Gives Peace of Mind

While an attorney opinion letter can provide insight into a property’s ownership status, it does not safeguard property like title insurance. Only title insurance offers homeowners the peace of mind that their investment is protected from hidden threats to their property rights.