The Death of an American Tradition in Mexico
By: Cheryl MIller, Broker, Baja Realty and investment
Title Insurance. An American tradition in real estate for almost 200 years. The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853. The vast majority of title insurance policies are written on land within the United States.
Wikipedia defines Title Insurance as: “a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Title insurance is principally a product developed and sold in the United States as a result of an alleged comparative deficiency of land records in that country. It is meant to protect an owner's or a lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.”
Title Insurance has been a standard, especially for lenders in the United States, as 98% property purchases are done through a lending institution. It is a way the lending banks protect the asset upon which they lent. This number is reversed here in Mexico, with only 2% of property sales having a mortgage. As such, American concepts such as Escrow and Title Insurance are relatively new to Mexico, and not at all the traditional way of doing business for Mexicans.
The concept of Title Insurance has grown to include many other countries around the world including Canada, Australia, the United Kingdom, New Zealand, Japan, China, Korea and throughout Europe.
In 1997, Chicago Title issued its first Title Insurance policy in Mexico. Since that time a number of big players such as Stewart Title, First Fidelity, First American Title, Stewart Title Latin America, among others, entered the Mexico market and offered similar policies to buyers. In its time, most foreigners buying property in any part of Mexico, opted to purchase the insurance, as another safety step in the process of buying foreign property.
At that time, Robert Calamari, President of Global Title and an issuing agent for First American in Mexico stated, “We have determined that our risk, as underwriters on Mexican property, is not much greater than insuring property in the United States. Assuming the same due diligence standards in researching the property are met”.
However, as of 2014, after a brutal beating in the worldwide economic crisis, ALL but one of the Title Insurance companies, based out of the United States or their Mexican subsidiaries, have PULLED out of the Title Insurance market in Mexico altogether. The last provider, Fidelity National Title Insurance (now called Amour Secure), still here in Mexico, offering insurance in any part of Mexico, but on a VERY limited basis. They will not insure properties not in already approved communities or projects. They will not insure non-urban land.
So what does that mean? Well, simply put, Title Insurance policy may or may not be available to obtain. If you have current policies, the companies are obligated to honor them for as long as you own the property, but they do have the right to sell your policy to other providers.
What can you do? To protect yourself, it is very important that you pay for a Title Search Report. A Title Search Report is the basis of the granting or declining of a Title Insurance Commitment Letter and its ensuing policy. You, as the home/land buyer have this option to have a Title Search Report performed for you as a private party. It will describe any problems, potential problems as well as the history of the property title. Although, the preparer of the Report will not give you any legal advice or tell you to buy or not buy, it will give you, as a potential buyer, your attorney, your realtor and the Notario basis to make those decisions.
In subsequent issues of this real estate section, an expert on Title Search Reports will be writing an informative article, so stay tuned.
Cheryl Miller, Broker Baja Realty and Investment. 624-122-2690, firstname.lastname@example.org