Why Most Title Insurers Consider Real Estate Options to Be Risky

Please keep in mind that title insurers, by the very nature of their business, are rather skittish when it comes to what they will insure. And to most title insurers, insuring real estate options is perceived as being risky business. Title insurers generally consider straight or naked real estate options, which are not contained in lease-options, to be more risky than so-called ordinary real estate instruments. Why the greater perceived risk with real estate options? There are many reasons. For example, all title insurers fear that an increase in the value of a property under option could cause an optionor to refuse to transfer the property's title after the real estate option has been exercised. In a nutshell, title insurers are leery about being held responsible for the potential cost involved to legally force an optionor to transfer the title to the property under option. Title insurers are also fearful that the title to a property under option may be owned by an individual who could become afflicted with some sort of disability, which would preclude the transfer of the property's title except by a potentially time-consuming and costly specific performance lawsuit.

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