In a recent landmark move, Fannie Mae’s expansion of the use of an Attorney Opinion Letter (AOL) for additional types of properties marks a significant shift in real estate practices. For those navigating the realms of For Sale By Owner, or engaging with Real Estate Agents, Brokers, or Realtors, understanding the nuances between an AOL and traditional Title Insurance Policies is now more impactful than ever.
Fannie Mae’s Endorsement and Its Implications
In the past, attorney opinion letters were not permitted in deals involving loans secured by certain kinds of properties. This restriction applied to units in condominium projects, cooperative share loans, leasehold estates, and manufactured homes, among others. However, Fannie Mae updated their stance in December so that AOLs may be used to secure loans for units in condo projects and for other properties subject to restrictive covenants and agreements. Since AOLs can offer a more cost-effective option for property verification compared to traditional title insurance policies, this is great for making home and property ownership more attainable for the average American. It also means more freedom of choice in real estate decision-making, which is a paramount core value at Ohio Broker Direct. However, it’s important to note the limitations of an AOL, particularly in terms of recourse for homeowners against liens that were not discovered during the title search.
Attorney Opinion Letter vs. Title Insurance Policy
Ohio Broker Direct presents a detailed comparison for your consideration:
| Risk Protections for Homeowners | Attorney Opinion Letter | Standard Policy | Extended Policy | ALTA Homeowners Policy |
|---|---|---|---|---|
| Record Defects, Liens, Adverse Claims, Encumbrances, or Other Unknown | Not Covered | ✔ | ✔ | ✔ |
| Forgery or Fraud with the Execution of Documents | Not Covered | ✔ | ✔ | ✔ |
| Mental Incompetence or Undue Influence of the Grantor | Not Covered | ✔ | ✔ | ✔ |
| Missing or Undisclosed Heirs | Not Covered | ✔ | ✔ | ✔ |
| Improperly Probated or Misinterpreted Wills and Trusts | Not Covered | ✔ | ✔ | ✔ |
| Conveyance by a Corporation or Partnership without Legal Authority | Not Covered | ✔ | ✔ | ✔ |
| Conveyance by a Minor | Not Covered | ✔ | ✔ | ✔ |
| Incorrect Legal Descriptions | Not Covered | ✔ | ✔ | ✔ |
| Non-Delivery of Deeds or Delivery of Deed after Death of Grantor | Not Covered | ✔ | ✔ | ✔ |
| Clerical Errors in Recorded Legal Documents | Not Covered | ✔ | ✔ | ✔ |
| Unmarketable Title as Insured or Lack of Legal Access | Not Covered | ✔ | ✔ | ✔ |
| Unrecorded Liens | Not Covered | ✔ | ✔ | |
| Survey and Boundary Issues | Not Covered | ✔ | ✔ | |
| Claims by Parties in Possession Not Disclosed in Public Records | Not Covered | Not Covered | ✔ | ✔ |
| Claims to Easements or Easements Not Disclosed in Public Records | Not Covered | Not Covered | ✔ | ✔ |
| Existing Violation of a Subdivision Law Impacting the Land | Not Covered | Not Covered | Not Covered | ✔ |
Table courtesy of Ohio Broker Direct, your Ohio Flat Fee MLS Listing Service Real Estate Professionals.
Who Should Pay for It?
The question of who should bear the cost of title insurance – buyer or seller – is a critical negotiation point in purchase agreements. Practices vary across Ohio, with norms differing in various regions. As such, having options for both Buyers and Sellers so that they’re free to make their own choices is what we believe in. At Ohio Broker Direct, we emphasize the importance of buyer and seller awareness and the right to negotiate each item individually.
Conclusion
Fannie Mae’s new rules that expand the use of an attorney opinion letter marks an important change for real estate transactions. As these developments unfold, Ohio Broker Direct is dedicated to guiding you through these changes with expertise and a commitment to transparency.
For further guidance on title insurance and the implications of Fannie Mae’s changes, reach out to Ohio Broker Direct. We are here to empower you with knowledge and support in your real estate decisions.
