Title Insurance Can Make The Difference

By Adoline Brown

Sometimes prospective home buyers consider title insurance superfluous, especially when they start adding up all the costs of their new home. County records may show that the deed of ownership is clear of any liens or claims from other parties and the buyers will think “Why bother”?

Sometimes, title insurance can mean the difference between delight and disaster. Consider the case of the three elderly cousins who pooled their money and together bought a piece of vacant land more than 20 years ago. They had saved for years to make their purchase, keeping it as an investment without often looking at it because while they lived is Spokane, and their property was in Florida.

One day, the three decided to visit a mutual friend who lived in the city where their land was located. While they were there, they drove by, just to see how it looked. Imagine their surprise to find a shopping mall had been erected in their absence. How could this be? A con-man had forged their signatures to a document and had sold the land to a developer. The con-man skipped the country with the cash, the police in hot pursuit. The developer had invested in title insurance. The signatures had looked authentic to the title company, a policy was issued, so the developer was covered. Would this mean a lengthy lawsuit for the three women, with little hope of recovering anything? No. The title company paid the women more than $1 million dollars.

This is not an isolated case. Losses paid by title insurers have more than tripled over the past ten years, according to the American Land Title Association, an industry group. Even a lengthy search through public records will not guarantee that a piece of property is free from problems or claims. There can be fraud or forgery, as in the case of the three women. A previous owner can have unreleased liens or judgements or there can be problems with easements, undisclosed heirs or mistakes in records. The seller may be a minor or mentally incompetent. The sellers may be getting a divorce or going through bankruptcy. Other persons may have a life tenacy or there may be confusion resulting from similar or like names. So just what is title and what is title insurance anyway? How does it benefit a buyer?

A title is a plethora of rights in real property. The chain of title is the property ownership history, telling who bought it, who sold it and when these events happened. The title company searches through public records or checks with title company files maintained by various title companies. A tax search is conducted to determine the present status of general and real estate taxes against the property. Some title companies send inspectors to look at the real property to check the location of improvements, to look for easements and to check on who is living at the property. A title search determines that the property seller really has the right to sell the property and the buyer is getting all the rights to which he or she is entitled. After the policy is issued, the title company will defend the property title and pay losses that may be incurred if there is a problem covered by the policy. Title insurance asserts that the title to a piece of property has quality. Lenders mandate that someone asking for a loan buy ‘lender’s title insurance’. This covers the lender’s interest in the property and the coverage decreases as the loan is paid. As ‘owner’s title insurance policy’ protects against financial loss, including court costs from many claims against property that may not be apparent in legal records. It is less expensive to buy both policies from the same title company at the same time.

As the need to finance real property grew, so did the demand for title insurance. Today, there are more than 150 different title companies in the United States, with branch offices all over the nation.

Seven Good Reasons to Have Title Insurance:

  1. A mortgage may have procured by fraud or duress.
  2. There may be defective recording.
  3. A mortgage may be voided because it was signed when the grantor was in bankruptcy.
  4. Title insurance covers attorney’s fees and court costs for matters covered by the policy.
  5. A deed or mortgage may have been signed by a minor.
  6. A deed or mortgage may have been made under power of attorney when the power was terminated.
  7. A deed or mortgage may have been made by someone with the same name as the owner, but not the owner.

Adoline Brown is an expert in title insurance, and has worked with Chicago Title Insurance for 19 years. Her address is 1616 Cornwall Ave, Ste 115, Bellingham WA. She can be reached by phone at (360) 398-2010.

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