How Title Insurance Can Save You Thousands with Ashlee Reeder

Have you ever wondered what title insurance is? In this Episode, Ashlee is going to tell you all about what title insurance is, how it works with your real estate closing, and why it's so important to have it when you're buying a home.

This week we have Ashlee Reeder an Escrow Officer.

Title Insurance is a product that protects you against financial loss if the title to your property is challenged. Title Insurance also protects you if you are named in a lawsuit because of your ownership interest in the property. 

Title insurance provides protection against unforeseen events such as fraud, errors in public records, and legislative changes that could affect your title.

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Transcript

Ron Pippin: 0:00

Hey, my friends, we are here. And today we have Ashley ready. So we have Ashley reader with us receipts from, I'll guarantee right? Yep. The wrong company. But we want to talk to Ashley because Ashley actually has a lot of experience in title. And as we talk, she says Title is kind of boring. I remember. You know what, honestly, it probably really is kind of boring. But it's really, really important. And so we're gonna talk about why title insurance when you're buying a house is really important. So what's first off? So first welcome, Ashley.

Unknown: 0:40

That's Thank you.

Ron Pippin: 0:41

Have you here. So let's talk about what is title insurance. What is title insurance.

ASHLEE REEDER: 0:46

So title insurance is basically an insurance policy protecting either the owners rights or the lenders rights to a property. So there's two types of types of title insurance policies. There's an owners policy, which protects the homeowner. And there's a loan policy which protects the lender, basically, they cover different things the owners policy covers has more coverage, and it coverages up to the purchase price of the home. It's going to protect the owner. So they're the ones that are going to be able to make a claim if if anybody sums back if there's like a forgery on a deed and somebody's like, Hey, you don't own this property. I own it, this was deeded over fraudulently, they were gonna step in, cover all the attorneys fees and make it right so that you're not facing legal fees and all of that, whereas the owners policy, right. That's the owners policy. Yes.

Ron Pippin: 1:40

Okay. So let me make it clear. So the owners policy is protecting you as the buyer, as the lender, correct. Okay. So where I'm have been really unclear is, like I is the is the Owners Policy optional. They can opt out of that

ASHLEE REEDER: 1:59

kind of thing. It is optional. It is. It's that for

Ron Pippin: 2:03

me, for me before you answer that question, okay, so the it's an optional policy, because I was always under the impression that like if you got a lender's policy, like your cover, but that's not the case, right?

ASHLEE REEDER: 2:15

That's not the case. So lenders policy only covers the lender, so they're the only ones that can make a claim to the policy. And a lender can only make a claim, if there is like a prior liens or something that wasn't cleared off from a prior owner that's trying to foreclose affecting their their first lien position, basically.

Ron Pippin: 2:36

So the owners policy, so the lenders policy is only covering the lender. So if the owner has an issue, it doesn't cover anything, but it only covers they can only make a claim if somebody else is trying to foreclose on the property. So like, like they want to be first lien, correct. Yep. And so if somebody else comes back and says, Hey, I had a prior lien, and and I haven't been paid, I want to foreclose, which leaves that first lender out of first position, right? Correct. Yep. And so they would be in second position, which they may or may not get money if that if that lien holds true. So that's what that's what the the insurance policy does is saying, hey, look, we've checked, there's no more liens on this property. And we're ensuring that so if somebody comes back and says in that case, and says, Hey, I want to I have a lien on that property, right? I said no, that ensures that if that comes back for whatever reason, and says, Oh, that is a valid claim. Insurance policy pays that

ASHLEE REEDER: 3:36

off. Yep. The insurance policy kicks in and pays it off. All right, cool. So the learning stuff here, yeah, but it doesn't protect the buyer. So a homeowner's policy, which is typically paid for in 99% of real estate transactions. In fact, the states found it so important, they actually include it in the contract that the seller will pay for it. You have to write an addendum to write that out. If you don't want it

Unknown: 4:00

a lenders policy or an owners policy.

ASHLEE REEDER: 4:03

Yeah, okay. A loan policy is going to be required by every single lender, nobody, no lender is going to loan money and not have insurance that they're gonna have the first right to foreclose because they don't have foreclosure works, at least in the state of Utah, is it's by recording so whoever has first lien position can wipe out all of the secondary liens. So if you're loaning, you know, $400,000 you're gonna want to make sure that your investment is protected. Yeah. Right. And it's kind of the same thing for homeowners policy. I mean, this is the biggest investment people make in their whole life like I and I would want it protected. Sure. No, I had one recently where well, not recently has been a couple years ago, where we went to sell and there was a mechanic's lien from the builder. They bought the home from the builder. The contractor filed the lien, gosh, the lien perspective, so they had done work. The lien recorded assets. They bought the property, but it still should have been paid by the builder. And it's a title claim. So the title company, they went back to had to pay that off, they almost couldn't sell the property.

Ron Pippin: 5:11

So how did they record a lien after they bought the house so that the first, the first mortgage puts a lien on the property to say, hey, addition, but then the builder or the the subcontractor, whoever it was, came back in and put a lien on the property after right? That's a second position lien, right?

ASHLEE REEDER: 5:32

It is, yep. Okay. But a lien, because they had a homeowner's policy, it covered it because you have mechanic's liens, protection and a homeowner's policy. So the way the state works is contractors file, notice that they're starting work on the property, that they have six months to protect a lien. So if they close within that six months, they can still record a lien, even after the builder sold the property. So that's what happened here. And you know, thank heavens, they had a policy, their title company, the title insurance company paid it and they were able to sell and didn't have to pay for that contractor. So even

Ron Pippin: 6:09

though somebody bought the house, and there was a lien put on, because the builder didn't pay somebody, right, that's still their responsibility, because it's a lien on their house, even though it should have been paid by the builder, they're responsible for it. Right? That can really suck.

ASHLEE REEDER: 6:24

Yeah, absolutely. It also, I mean, also with what people don't realize what title insurance is, where you're doing a lot of the work up front to make sure that there's nothing that comes back. So we're incurring a lot of cost up front to search the property and address any issues before you buy it, we're going to tell you, all the easements that are recorded, we're going to make sure that any liens that we find are paid off. So we're doing a lot of the work ahead of time, because nobody wants to notice that they're getting sued. So I mean, so there's not a lot of title claims, I mean that they're rare, they really are because we really do our best to search everything and get everything straightened away. So it's a smooth transaction, there's never going to be any issues. But you do have insurance that if for some reason something's missed, or something unforeseen comes up, it's you're covered, you don't have to, you know, incur all these, you know, it could be 10s of 1000s, or hundreds of 1000s of dollars potentially in in costs and attorneys fees and everything to fight that.

Ron Pippin: 7:30

So that's so to me, that's why you want an owner's policy is because yes, probably the chances of using that aren't really high, right? Same thing with like, earthquake insurance, or French. So let's say the chances of using an earthquake insurance is not really high. But it can be devastating. If you have an earthquake, and you have earthquake insurance. Same thing with this tax lien for 20 3040 $50,000. Or who knows, that you didn't know was there and all of a sudden you're responsible to pay this lien. It's just like that can that can be devastating when you're going to sell a house and you're thinking, Oh, I'm going to sell this house, I'm going to go get another house. And I'm going to take my equity out all sudden they take 50 grand out of your pocket. Yeah, like all that changes the entire scope of what you're

ASHLEE REEDER: 8:19

doing. I mean, that can devastate a family. I mean, that's what people work for, and how they, you know, build retirement and assets and all of that. So, I know like for me, and granted, I know, I work for a title company, but I would never purchase a property that I wasn't getting an owner's policy on. Yeah,

Ron Pippin: 8:36

well, I'll be honest with you, like, I've done some loans that didn't have an owner's policy. And yeah, I get I get done until now. I don't know, understand the difference. And I wasn't it was I know that I've been in this business for

Unknown: 8:53

just like, you know,

Ron Pippin: 8:56

title insurance. It's just one of those things like you just go what is title insurance? Right? Like, really didn't understand. And so I'm showing my, I'm showing my naivety like I don't pretend to know everything. But

Unknown: 9:10

it's now that I have those things.

Ron Pippin: 9:13

Not get it. Yeah, it totally is. But I'm really glad that we talk because this makes a huge difference. He just didn't understand the difference between the lenders policy, what it covered, and the owners policy and what I've covered, and it's like man, I will never write I will I will make sure somebody makes sure that they have an owner's policy because it's really important I I assist homeowners policy, if there was another lien or something like that, that the lender policy or that sorry, yeah, the lenders policy was going to go remove it, but that's not the case. No.

ASHLEE REEDER: 9:47

Well, in the lenders policy, the coverage goes down as you pay the loan down. It's only for the amount that you owe on the loan. So an owners policy is going to be for what you what the home value is what you purchase. For Sale, they'll pay up to that for as long as you own the home or your heirs own the home. I mean, it transfer, it transfers even down to your heirs. So you don't have to purchase it every year. It's just when you when you purchase the property, it's not like a regular insurance policy that you're paying annually, like it's a one time deal. And you're you're insured for as long as you own the home.

Ron Pippin: 10:21

Oh, I see. Okay, this has been I'm actually glad I had you on here. You have anything else that journey other examples that you know of? Or?

ASHLEE REEDER: 10:32

Well, I've had, this hasn't personally happened to me. But sometimes when you have deaths in the family, and you have you know, a property has to go through probate, if they don't find all of the heirs to a property, you know, one of those heirs can come back and say, No, this is this is my property, like I have a right to this and who's to say, and there's nothing in the records that like that we would know. And you know, so you have legal counsel that's going to go in and fight that and defend your right to that, you know, they're going to take care of that for you. You're not on your own with that. So you just, it's more peace of mind that you purchase this property, it's yours, you know, nobody's gonna be able to come in and take it from you. Or, you know, so you owe me this much. Because I have a right to it. The other thing that's cool about it is if you have like a neighbor's shed encroaching on your property, if it's over the property line, and the city comes in, and make sure you tear it down, or if you're encroaching on the neighbor's, you know, you have title insurance for that, even after the fact that, you know, you can file a claim, and you know, what will compensate whatever that cost and move that?

Ron Pippin: 11:43

Cool? Yeah. Yeah, this has been really enlightening. For me. It's been enlightening for other people as well. But it's been really good to know, sometimes, you know, you're in an industry for a long time. And there's so many, you know, outlying parts there. I mean, is that you just don't know, all of the intricacies? You know, I know the loan part really well. And we just ordered title insurance. It's like you take care of the title insurance, we'll do it all, you know, right, you go do the appraisal section, you do the title, we'll do the loan. Right. It's all part of the loan process. You know,

ASHLEE REEDER: 12:18

it is? Absolutely. Well, the interesting thing is and you don't deal with the homeowner side, you deal with the loan, the loan policy side, which is required, but even when people are, are paying cash for a home, and there's no loan policy, because there's no loan, I can't do a deal in the state of Utah, if there's not a title insurance policy, which sometimes people have heartburn about. They want to come in and just have this file paperwork. But the state will not allow us to do that. If people don't want to buy title insurance at all. In that scenario. They don't want a homeowner's policy. There's no loan policy, you know, they have to go through an attorney, they cannot use a title company. I didn't know that either. Yep. So there has to be the state looks at that. Like we're practicing law. And and obviously, we're not attorneys, so we're not allowed to do that.

Ron Pippin: 13:08

Although you have attorneys on staff, yes. But then they're gonna come in and do the loan paperwork, because that's not what No, no, no, sorry, the title. Yeah. Yeah. Right. Okay. Cool. So this has been really good.

ASHLEE REEDER: 13:19

Yeah. The other thing that I just wanted to talk about, because it's happened a lot this year is just vesting issues like just have, I don't think people understand that if they're on title with their spouse, that doesn't necessarily mean that they're entitled as joint tenants. If they're just

Ron Pippin: 13:39

there, you're starting to talk about joint tenancy and tenancy in common investing. Talk about what that means what is vesting? Because a lot of people won't know what that means.

ASHLEE REEDER: 13:49

Okay. Um, so vesting means how your name's read on, on title with with the county, how legally, your names are, are on there. So a lot of people come in, and they think it's like a car. So it's like, you know, Joe, and Sally and it can be interchangeable, but that's not how it works with real estate. It's if it's Joe and Sally, the state considers them tenants in common, it has to have the verbage as joint tenants

Ron Pippin: 14:20

tenants in common. So let's let's make sure that we understand what the efforts are to

ASHLEE REEDER: 14:24

Okay. So 10 have in common. So, tenancy in common means, you know, you own 50% of it, I own 50% of it. If I were to pass away, my 50% is going to go to my heirs and my heirs will have to file a probate with the court and then decide how it goes how my properties distributed from there, okay. joint tenancy gives you rights of survivorship. So, like I'm on title to art my house with my husband as joint tenancy. So if I pass away, the house can automatically be transferred And he doesn't have to hire an attorney and you know, have a court appoint him my heir like it's already set up that way. Whereas

Ron Pippin: 15:08

the way that I always whether I'm explaining this right or not the way that I explained it is, like, if my wife and I, if we're joint tenants, then I own the house 100%, and she owns the house 100%. So that if something happens to either one of us, like, so if I go and get hit by a bus, my wife still owns the house, right? percent. So there's no issue, she just owns the house. Right? Whereas with tenants in common, I own 50% She own 50 50% I get hit by a bus, she only owns half the house. Now. The she owned the rest of the house, there's my the kids own half of the house, like who owns the house. So it could get really messy. So normally in the state of Utah, correct me if I'm wrong. Normally in the state of Utah, it's joint tenants just because we are not a community property state. Right. Whereas with a community property state, oftentimes its tenants in common and less and less somebody in the state like most the time it's joint tenants, unless somebody said, No, I don't want it that way. I want the best thing to say

Unknown: 16:19

tenancy in common. Well,

ASHLEE REEDER: 16:21

no, I'm okay. Sweet. It has to say with the state of Utah, either husband and wife or joint tenancy, otherwise, it's automatically tenants in common.

Ron Pippin: 16:32

Oh, yeah. So you have to specify that. Yes. Okay. So

ASHLEE REEDER: 16:37

yeah, I mean, it has to have that exact verbiage. I just had one, gosh, a couple of weeks ago. And, and thank goodness, the county did let this pass because I the worst thing for me to do is to pull a title report and tell somebody they have to go through probate court. But I had one just a couple weeks ago that they were in title as a married couple. And the county wanted it to go through probate because they said that wasn't the same thing as what the statute says is husband and wife. They let it go through because I argued and fought but I'm

Ron Pippin: 17:12

new. That's why the new

ASHLEE REEDER: 17:15

right, but from now on, like, I'm going to make sure it says that anybody I put into title because like that is like I couldn't even imagine telling this lady that I mean, she just lost her husband to COVID. Like I couldn't imagine telling her that she now has to go find an attorney go through all of that the legal fees, and plus the time and all that lose herself just to have the same result. So it's super important. And I don't think people realize, realize that. Yeah, so and the other thing, I've noticed cash just lately, my own mother had this. So people are doing really good. And they're having a trust, like trust set up for their family trusts. And a lot of attorneys aren't like they're giving people the deed to put it in the trust, whether it's not being recorded. So their property is not in the trust. So they pass away and same thing, it has to go through probate, but they think it's in the trust, but because it's not it was never recorded. So that has to be recorded into into the trust with the county. Yeah. Yeah. So a lot of cities aren't doing that. And I don't think people they think it just is done because they don't understand how it works. I mean, like I said, my own mom, I'm like mom found a trust for like 10 years, how is it not in how is your house, not in it?

Ron Pippin: 18:31

Well, I've heard that too, is like a lot of people will set up trusts, and then they don't fund the trust. fund the trust. It's just like, you got to put you got to put your assets in the trust name. Otherwise, it's just like you have this this document that does you know,

ASHLEE REEDER: 18:47

right, exactly. I mean, it doesn't mean anything. I mean, just because you want it there, it has to be asked to be physically recorded. So the trust owns the property with the county. Well as Ron.

Ron Pippin: 18:58

Yeah, this has been good. So if somebody needs to get hold of you, if they say actually it's cool, like and by the way, was actually is cool. If they want to get hold of you, what is the best way for them to reach you?

ASHLEE REEDER: 19:11

So you can even call my office. I'm in South Ogden, my phone number here is 801-528-4392. I've got an awesome team or my email is just Ashley a sh L E at Utah title calm, and I know you're guaranteed. So

Ron Pippin: 19:29

I don't know that you're in South Ogden, but that does not mean that you can't write work for some of the other counties.

ASHLEE REEDER: 19:37

I can close anywhere in the state of Utah. I can do the title work for it.

Ron Pippin: 19:40

Okay, cool. So, thanks, Ashley. This has been good having you here. I've actually learned quite a bit so you are on

ASHLEE REEDER: 19:47

here. Good. Thanks for having me on. I appreciate it. You're awesome. Thanks. All right. And if

Ron Pippin: 19:53

you guys need to get hold of me or my team, just call me at 801-628-7667 love to help you out and And exactly and we'll catch you next time we'll see you

Unknown: 20:03

later