how to acquire title insurance on a property purchased at auction


#1

so we have some private money to purchase a home at auction. the initial capital we borrow must be repaid after the purchase and we plan on doing so with a conventional loan. speaking with the bank, it seems that title insurance is a must for a loan(no kidding…) i recently spoke with a title insurance company who said they could help provide information on the property but would not complete a preliminary title report if the property was not in escrow. this left me wih the notion that i would no be able to get a PTR before i purchased. the bank did however say that escrow would be re-opened when we refinanced, does this mean we could aquire title insurance at this time?

what i want is to get PTR before i purchase so that i know that there is nothing against the home. i guess this is sketchy because if it gets issued a week before auction, something could come up, and the PTR would not cover it, so i would be on the hook and potentially unable to refinance.

so, how can i get title insurance on an auction purchased property?

Thanks


#2

also, the title company proposed issue a binder for a few years? whatever that means? idea being that the binder could be switched out with a owners title insurance policy during the excrow opened during refinance.

any thoughts?

Thanks


#3

A few thoughts for you:

Most title companies will do a preliminary title report without an escrow if you pay for it. Expect something around $300.

You might want to consider buying it at auction in someone else’s name than the loan will end up in, or even an LLC or other entity. This will help not only with securing title, but also in making sure the loan is treated as a purchase money loan, rather than a refi. This has both legal and financial benefits (better rates, limits on refi amounts). Talk to an attorney about the best way to do this.

Binder policies are always a good idea if you plan to resell the home, as it lowers the cost of the title insurance upon resale.