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Why Title Insruance May Be Important To You

PURPOSE: Owner’s Title insurance is extremely important when purchasing a house or other real estate property. Yet many consumers are unsure about what title insurance is and what it protects against. The purpose of this white paper is to help the purchaser of real estate property understand how titles can become defective and decide whether Owner’s Title Insurance is the right choice for them.

The job of searching the public records to identify existing rights and interests is not an easy task. Title Companies search public land records for matters that may affect the title, but even the most exhaustive search may not uncover all of the title defects. Owner’s Title Insurance protects the purchaser against hidden title defects. Potential defects might be:

  • Someone else owns an interest in your land
  • You do not have a legal right of access to and from the land
  • Restrictive covenants
  • Someone else has an easement on your land
  • Liens on your title
  • Unmarketable title
  • Forced removal of existing structures
  • Other defects, liens, or encumbrances

Lenders, typically banks or mortgage brokers, know the risks of real estate ownership and require Lender’s Title Insurance to protect their investment, but it doesn’t protect the new owner(s).

COMMON TITLE PROBLEMS Here are three real-life examples:

Fraud & Forgery
Those involved in real estate fraud and forgery can be clever and persistent—which ultimately can become a new owner’s nightmare. An innocent buyer purchased an attractive home site through a realty company, accepting a notarized deed from the seller. Shortly thereafter another couple suddenly appeared and initiated legal action to prove they were the entitled owners of the property. As it turned out, the forger spent time in advance at the local court house, searching the public records to locate property with out of town owners who had been in possession for an extended period of time. The individual involved then forged and recorded a deed to a fictitious person and assumed the identity of that person before listing the property for sale to an innocent purchaser, handling moot contracts through an answering service. Also, the idetity of the notary appearing on deeds was fictitious as well.

Conflicting Wills
Conflicts over a will from a deceased former owner may all too quickly place your home ownership at stake. Alter purchasing a residence, the new owner was startled when a brother of the seller claimed an ownership interest and sought a substantial amount of money as his share. It seemed that their late mother had given the house to the son making the challenge, who placed the deed in his drawer without recording it at the court house. Some 20 years later, after the death of the mother, the deed was discovered and then filed. Permission was granted in probate court to remove the property from the late mother’s estate, and the brother to whom the residence initially was given sold the house. But the other brother appealed the probate court decision, claiming their mother really did not intend to give the house to his sibling. Ultimately, the appeal was upheld and the new owner faced a significant financial loss.

Missing Heirs
When buying a home, it’s important to remember what you don’t know can cost you. A couple purchased a residence from a widow and her daughter, the only known heirs of the husband and father who died without leaving a will. Soon after the sale, a man appeared claiming he was the son of the late owner by a former marriage. As it turned out, he indeed was the son of the deceased man. This legal heir disapproved of his father’s remarriage and had vanished when the wedding took place. Nonetheless, the son was entitled to a share of the value of the home, which meant an expensive problem for the unwary couple purchasing the property. The good news? Every one of these examples has a happy ending because each of the new owners purchased Owner’s Title insurance at the time of their closing. The title company paid the claims, along with additional amounts in legal fees incurred during the defense. Title insurance protected everyone involved in these real-life examples.