Nov
15
I’ve queried several friends, colleagues, and people in my sphere if they’ve ever filed a title insurance claim. No one ever did. Yet everyone pays for title insurance when they buy or refinance a home. Not satisfied with the result of my informal query, I asked a probate attorney I knew and he said that title insurance is not evil and indeed very necessary.
According to wikipedia:
Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It is available in many countries but it is principally a product developed and sold in the United States. It is meant to protect an owner’s or 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 as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.
Here are those title defects:
- Forged deeds, releases, or wills
- False impersonation of the true owner of the property
- Undisclosed or missing heirs
- Instruments executed under invalid or expired powers of attorney
- Misinterpretations of wills, or discovery of a later will after probate of first will
- Deeds by minors, by persons of unsound mind, or by persons supposedly single but in fact married
- Liens for unpaid estate, inheritance, income, or gift taxes
- Mistakes in recording of legal documents, or deeds recorded but improperly indexed and therefore not found through a title search
- Disputed release of prior mortgage or lien, as given under mistake or misunderstanding or ineffective release of prior mortgage, as
fraudulently obtained by predecessor in title - Undisclosed divorce of one who conveys as a sole heir of a deceased former spouse
- Deed to or from a “corporation†before incorporation or after loss of corporate charter
- Claims resulting from the use of “alias†or fictitious names by a predecessor in title
For more on why you need title insurance, check out this bulletin by Land Title.
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2 Responses to “Why you need Title Insurance”
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I am a title insurance agent. Everyday I work with prevention of title claims prior to closing and correction of title problems that are discovered later. Over my morning coffee, these are the problems on my desk to work out this morning:
1. File closed in 1999 with owner title policy. The insured just received notice of revival of a state tax lien from 1997 in the amount of $696. I’ll be reviewing our search file to see if the lien is valid. If so, how was it missed? If the lien is not valid, we’ll defend the property and fix the problem. If the lien is valid, it will be paid. The insured owner is covered.
2. I have a search that revealed a second mortgage in foreclosure. The sellers had filed bankruptcy and assumed they could ignore the foreclosure notice. They put the property on the market and sold it to a buyer who was smart enough to order title insurance. We suggested that the seller pursue a “short sale†– a reduced payoff with the lender to avoid foreclosure. I’ll help them process the short sale request later today.
3. I have a corrective deed to prepare and send out to a seller. Both the buyer and the seller failed to disclose there was a second parcel that should have been conveyed back in 2003 when we insured their title and closed the purchase transaction. When discovered, the seller’s attorney refused to assist the correction in any way even though he had prepared the original incorrect deed. We are fixing it.
4. In 2005 we held money from a seller’s proceeds to satisfy numerous liens. They had been paid but not satisfied of record. The seller’s attorney will not return our phone calls. We are hiring an attorney – at the seller’s expense from the funds in escrow – to resolve and satisfy the liens and clear the title.
These four simple cases are part of my normal everyday work life. Each of the files is covered by an owner title insurance policy and thus the work I am doing is part of that coverage. It’s unlikely that any of this work will be counted in claims reported by title insurance companies. This is the unseen work done by the folks who get the lion’s share of the title insurance premium.
This afternoon, I’ll have a new set of title issues to work on. I love my job and hope this helps you understand why an owner title insurance policy is a good investment.
Thanks Diane for citing real world examples of why we need title insurance.