Title insurance is commonly misunderstood in the Timeshare Industry, this article attempts to explain what Title insurance is, and when or if it applies to you!
Title Insurance, in its most basic definition in regards to timeshares, is optional insurance for the buyer of a timeshare to protect them against financial loss due to title defects, undeclared liens, or other matters that could interrupt or impact the transfer of ownership of a timeshare title between two people. .
Unfortunately the timeshare industry is ripe with people that are desperate to sell, and entities that are more than happy to help them. The problem is that many of these organizations are not properly licensed to deal with real estate matters, and subsequently do not follow the proper procedures in regards to the transfer of ownership of a deeded timeshare properties between buyer and seller. This has resulted in an overwhelming number of issues with the actual transfer of the title at the resort level. When title insurance is not purchased, the buyer is completely unprotected should something "unexpected" turn up such as:
While I am certainly not saying that the average timeshare transaction encounters these issues, it is frequent enough to certainly be mentioned as a warning to ALL potential timeshare buyers in the resale market. Title insurance can be a cheap way to protect your investment and money spent to purchase the timeshare should any of the above happen during your purchase.
Title insurance only protects you up to your purchase price of the timeshare, and does not generally cover closing costs incurred. However like all insurance, you should read over the policy and details before you decide on anything!
Title insurance can range from $200 to $500 dollars, depending on the amount being insured. It is important to note that many timeshares on the resale market are often below this price. Some common sense should be used in this area, especially if you are buying a timeshare for a single $1, paying hundreds of dollars to insure a single dollar might be a bit ridiculous!
One of the most common scams in the industry today is the upfront fee company contacting SELLERS claiming they have a buyer waiting, but require them to fork over a huge fee for a "title search" or "title insurance". Again, common sense should apply, as title insurance and a title search is basically providing insurance that what YOU are selling belongs to you, doesn't have an outstanding Lien against it, doesn't owe any back taxes, isn't delinquent in maint. fees, etc etc. If you are the actual owner of this property, this information is something you (should anyway) already know! I personally wouldn't pay someone money to confirm I wast the owner of my own timeshare! Should the buyer choose to purchase title insurance, that is their right...however as a seller it is certainly not required!
Are you purchasing from the original owners of the timeshare (ie did they purchase the timeshare new from the developer directly) or are you buying from a reseller? Timeshares that have been transferred numerous times are at a much higher risk of title defects, and would be much better candidates for title insurance vs a timeshare purchased directly from the developer and only having one owner. Timeshares that are sold by large bulk resellers are also at higher risk as they are not likely even the owners of the timeshare they are selling in the first place...and you may never even get to speak to the actual owner of the property!
Remember, the whole purpose of Title Insurance is to ensure that the seller of the timeshare has the right to sell that timeshare, and that there are no issues with the title that would somehow prevent the transfer of the title from their name into yours and thus leaving you stuck in limbo after paying for a timeshare that you cannot properly take ownership of or utilize! Also by purchasing title insurance now, you can also provide proof to a future buyer that the title is free and clear (at least when you bought it) should you decide to sell it in the future.
It really comes down to how much you want to spend to protect your purchase price investment on a timeshare. If you are spending a great deal of money, title insurance is certainly a wise choice, however given the extreme depression of the resale market today with many if not most timeshares selling for between 1 and 25% of their original purchase price, title insurance may exceed the sale price of the timeshare itself. In these cases, economic common sense says that if your $1 timeshare turns out to have something wrong with it, just call the $1 a lesson learned and move on to the next sale!
If you have any additional questions, please mosey on over to our Timeshare owner forums, they are completely free and you can find tens of thousands of other owners in this community of knowledge
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