Why Smart Texas Private Money Lenders Insist on Title Insurance (And You Should Too)

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Why Smart Texas Private Money Lenders Insist on Title Insurance (And You Should Too)

Most Texas Private Money Lenders require title insurance in order to fund a deal. Although there’s some debate on the merit of this practice, it’s essential because it protects both you and the lender.

Although land and property transactions began occurring in the United States for almost all recorded history, the concept of title insurance is relatively new. Initial transactions were simple for obvious reasons. There was virtually no chance anyone else could lay claim to a property because so little of the country had been settled.

Because of this, the conveyancer system was used. Conveyancers worked similarly to title insurance companies in the sense that they carried out diligence, but they offered no guarantee that a property was free and clear. They weren’t lawyers, but rather, were local experts who could carry out research on any given property. They’d craft reports and sign off on them, which would give buyers/ borrowers and those financing purchases more confidence, but the transactions were still risky.

Watson v. Muirhead in 1868 changed this. Muirhead was a conveyancer hired by Watson to check into a Pennsylvania property. After finding a lien on the title, Muirhead consulted an attorney. The attorney told him the lien was invalid and Muirhead decided to certify the property was clear. Watson purchased the property, but it was later put up for a Sherriff’s sale to pay off the lien. The sale was legal. Watson lost his property and his money. He attempted to sue Muirhead (thus the groundbreaking case of Watson v. Muirhead), but he lost. At the time, Muirhead could have only been held liable if he had been negligent, and because he consulted an attorney and acted upon the attorney’s advice, Muirhead was not in the wrong from a legal standpoint.

The following year, the first title insurance company was formed. Today, Texas Private Money Lenders and virtually any entity handling the financing of a property requires that a title insurance company be involved in the transaction.

Title Insurance is a Win-Win Solution

While many people think title insurance is purely in place to protect the Texas Private Money Lenders, this early case highlights how important it is from a buyer or borrower standpoint too. The insurance company not only carries out the research, but pays out if, for some reason, a mistake on their part results in financial losses. Ergo, it will address things like unpaid taxes or liens that could become a problem later, existing loans, active or pending foreclosure, active bankruptcy by the current owner, undisclosed or missing heirs to the property, errors, fraud, and more.

You’ll risk less by having title insurance and can protect your own assets.

As a borrower working with Texas Private Money Lenders, you’ll have some skin in the game too. Although title insurance is not a 100% guarantee there won’t be an issue with the property later, purely because the title insurance company is using public records to certify, their willingness to pay out in the event there’s an issue protects your investment and the money that your financers are putting in as well. Simply put, getting title insurance is one of the smartest things you can do when you purchase a property.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLCDennis Dahlberg
Level 4 Funding LLC
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Dennis Dahlberg Broker/RI/CEO

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111 Congress Ave | Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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