Do-it-yourself projects may be a worthy endeavor for a handy homeowner refinishing a deck or a green thumbed gardener installing a herbaceous border. However, in the complex world of real estate transactions, DIY measures may backfire. Buyers seeking to cut costs with DIY methods can miss out on some vital resources.
The residential home market is experiencing a shift in attitudes. Rising interest rates and stiff credit requirements are causing a slow down in residential mortgage lending, as buyers struggle to get home loans. Rather than submit to the strict rules of the banks and creditors, many home buyers are turning to all cash deals.
According to data firm Realty Trac, Inc., cash sales are rising from coast to coast. Cash buyer trends include individual investors, second-home buyers and owner-occupant buyers. In the Miami area, for example, 67.1 percent of home sales were all cash deals. New York posted 57 percent and Detroit recorded 53.5 percent all cash deals in the first quarter of 2014. In Manhattan, cash buyers are purchasing trophy apartments with an advantage over borrowers who must depend on a loan to finance the purchase.
While cash buyers have the advantage of evading lender’s regulations, they should be careful not to forego essential industry safeguards such as title insurance. In a standard real estate transaction, a lender’s title insurance policy is required by the lender and provides protection up to the original mortgage amount. Borrowers have no choice—a homebuyer either purchases title insurance or else doesn’t get a loan.
With a DIY all-cash deal, homebuyers may try to avoid fees they mistakenly view as extraneous, such as title insurance. But cash buyers who don’t take steps to protect their rights of ownership jeopardize their entire purchase. Buyers should make the independent decision to purchase an owner’s title insurance policy in order to protect their own property rights. Without title insurance, the entire cash transaction is at risk.
Some Do-it-Yourselfers also try to trim costs by using cut rate title insurance providers. There are discount insurers who try to attract customers by offering bargains through online marketing. While it may seem like a bargain, consumers may not understand the intricacies of coverage and may not take into account the danger of leaving certain risks uncovered.
Moreover, an additional risk for the DIY homebuyer is that new title insurers may not have the experience of successfully searching property records, fixing title problems or paying claims. What will happen to the homebuyers who pay for discount insurance only to discover they received discount coverage which may not help them if/when a title issue arises? Will the discount shoppers really save money if the policy provider cannot adequately defend a title claim?
A homebuyer should have a seasoned attorney review the title insurance policy before purchase. The attorney should assess the policy in order to understand the extent of the coverage and adjust the language to ensure certain risks are covered, if circumstances call for it. Indeed, homebuyers are better off discussing the best route to purchasing title insurance with their attorney, and save the do it yourself efforts for the home improvements after closing.