Occasionally, I am asked the question: Why do I need to buy an Owner’s Title Insurance Policy if you have already checked the title and everything is clear?
Truth is, nothing is without risk. While everything may appear clear, there are situations that can result in a title insurance claim. Some examples of that are:
- Liens not yet showing in the public records
- Outstanding maintenance fees other than those not disclosed
- Loss of use
- Forgery (Satisfaction of Mortgage/Deeds/etc)
- Probate issues
- Outstanding Mortgages
Forged Deeds: You bought your new home from John Seller and Mary Seller, his wife. John Seller comes to closing with a properly executed Warranty Deed executed by both he and Mary. The title company examines the Deed, sees that it is executed properly in accordance with the laws of the State of Florida, and the closing proceeds smoothly. After closing, you move your furniture in and then a week later, you have a knock at the door. Why it’s Mary Seller. She just returned from taking care of her father in Michigan and what are you doing in her home? You show her the Deed she signed with her husband, John. Guess what? She did not sign the Deed and had no idea the house was sold. She insists you get out of HER house.
Forged Satisfactions: During the information gathering process, the seller told the title company that they own the house free and clear, meaning that there is no existing loan on the house. The title examination found that there was a loan at one time, but it was satisfied a month ago and executed properly in accordance with the laws of the State of Florida. About two months after closing, you receive a Notice of Lis Pendens from the bank, or more likely the private mortgage holder, that still has a mortgage on your home and that foreclosure proceedings are about to begin.
Probate Issues: You bought your new home from Jim Seller who bought his home from the Estate sale of the dearly departed Leslie Late. A year later, the long-lost son of Leslie Late stops by and informs you that he never received his share of the proceeds of the sale to Jim Seller. He now wants you to give him 1/2 of the sales price as his share of the inheritance!
Unsatisfied Mortgages: When you bought your home, the title company paid Anywhere Bank the funds to satisfy your seller’s existing mortgage on the home. So far, so good. Three years later, you go to refinance or sell the property and the title company you are using tells you that there is an outstanding mortgage to Anywhere Bank. You call the title company that handled your purchase, but they have gone out of business. You try to find Anywhere Bank, and they have been bought out. If you have an Owner’s Title Insurance Policy, your title company could possibly ignore the mortgage by utilizing an existing indemnification treaty many title insurers have with each other.
As you can see, though not common these are but a few of the issues that can arise that could cost you thousands of dollars in legal fees and, possibly, your new home!
Thank goodness you purchased that Owner’s Title Insurance policy!