The last thing that a commercial real estate developer needs is to learn that there is a problem with the title to the property they bought to develop and lease or sell. That type of fly in the ointment can sink a lucrative deal and delay your plans for the property indefinitely.
Some real estate developers think that they can shave a few dollars off their bottom lines by not purchasing title insurance. After all, an abstracting company ran the title for you, didn’t they? But even the best abstractors are only human — and humans make mistakes. Read on to learn how title insurance can save you a lot of headaches down the road.
Your investment remains protected
Financial losses related to the title of your property can be huge. Not having clear title to the property can halt development and real estate transfers until the mess is straightened out. Meanwhile, your dreams of turning a quick profit are dying before your eyes.
You only pay for it once
Unlike a mortgage note that comes due every month, paying for your title insurance is a one-time fee. If you don’t ever need it, it becomes just another cost of doing business. But should a problem arise with the title later on, it will be worth its weight in gold.
It can be a selling point for you later
When a potential buyer of the property you are developing starts checking into the property history for tax levies or liens, you can show them the copy of your title insurance policy. They will likely continue to do their own due diligence, but that can be a strong selling point if another property they’re interested in might not be free and clear.
Lenders require it. Shouldn’t you as well?
No bank or mortgage company will lend you money to purchase property without title insurance. Title claims can arise well down the road from the purchase date. Heirs can resurface, the Internal Revenue Service (IRS) can issue a levy and suddenly you are in jeopardy.
You don’t have to be a belt-and-suspenders kind of individual to understand and appreciate the added value of having title insurance on your newly purchased property. Still on the fence? Ask your real estate attorney to weigh in with their knowledge and experience.