Is Title Insurance Needed in a Cash Purchase?

Matt E. Bales, Jr., Esq.

Many purchasers of properties in Florida ask us if they need title insurance when they are buying a property in a cash transaction without mortgage financing. When a property is being purchased with mortgage financing the lender always requires title insurance but in a cash transaction without a lender being involved the buyer needs to determine whether to obtain title insurance for the property.

There are 2 types of title insurance policies in Florida. A Loan Title Insurance Policy and an Owner’s Title Insurance Policy. A Loan Title Insurance Policy protects the lender and its mortgage against unforeseen claims of third parties, title defects, fraud or hidden risks affecting the property following the closing. However, a Loan Title Insurance Policy offers no protection to a buyer of property. In order to be covered against these same risks following the closing a buyer would need to purchase an Owner’s Title Insurance Policy at the time of closing. The Owner’s Title Insurance Policy insures the buyer’s ownership interest against such claims which could arise after the closing and covers the buyer’s financial losses resulting from any such claims as well as the buyer’s legal costs and expenses which may be incurred in order to clear any such unforeseen claims.

Many purchasers are under the impression that they can save a few thousand dollars on closing costs by not purchasing title insurance in a cash transaction as there is no lender involved which requires title insurance. Although in a cash transaction title insurance for the buyer is optional, it can be very dangerous, risky and expensive to make a substantial investment in real property without the protection that an Owner’s Title Insurance Policy offers to the buyer. 

Without a title insurance policy a buyer is left open to any and all issues which could arise following the closing. For example, in the chain of title to the property there could be a fraudulent deed that one of the prior owners never signed and was signed by someone else. This would create a cloud on the title to the property which would be covered by an Owner’s Title Insurance Policy. Post-closing issues with any property can arise regarding of whether the property is bought with cash or a mortgage loan. Due to the security, protection and peace of mind that title insurance provides to buyers we always recommend that buyers in cash transactions obtain an Owner’s Title Insurance Policy.

Bales & Bales, P.A. is a Coral Gables, Florida based law firm which handles real estate transactions and acts as title and settlement agent throughout the entire State of Florida. We have closed thousands of residential and commercial real estate transactions for our clients during our firm’s inception in 2005 and our number one goal is to protect our clients throughout all steps of their real estate purchases and to ensure that at the time of closing all of the pieces have been put in place for a smooth and pleasant closing experience. We are available to assist you with your next purchase or sale and to answer all questions you may have regarding the title and closing process. Please contact us with any questions.