Title Insurance. It is one of the expenses associated with purchasing a home that is not often explained. Most do not understand why they need an owner’s title insurance policy, and it is rarely explained adequately. There are many title issues that could cost you financially to correct or cause your title in the property to be challenged. While your new home may be new to you, the property has a history. And while a title search may uncover any title defects associated with the property, even the most careful search may not disclose all threats, including hidden risks. Such hidden risks may not be uncovered until years after you purchased the property. Without title insurance, your title to the property may be worthless. With an owner’s title insurance policy, subject to the terms of the policy, your rights will be protected. Additionally, an owner’s title insurance policy may cover both the legal costs to defend your interests as well as certain losses sustained as a result of a covered title defect
Below is a list and explanation of the most common title issues:
- Errors in public records. Humans make mistakes, and a clerical or filing error regarding the property may have an effect on the deed and be costly to correct. A title search is performed in order to determine if your home’s title is clear, as well as to find any mistakes that could have been made in public records. For example, a person’s name may have been spelled incorrectly or mis-indexed in the land records so that a lien was not located as part of the title search. Any such lien or issue found later would create an issue that you would have to deal with in the future.
- Forged deeds, mortgages, satisfactions, or releases. Unfortunately, there are people out there who have less than honorable intentions. Sometimes forged or falsified documents are filed in the land records, clouding the rightful ownership of a property or creating liens or other issues. Once the existence of a forged or falsified document is discovered, your rights to the property may be at risk.
- Deed from a business entity without proper authorization; deed executed under falsified or expired power or attorney. While the chain of title may look clear for your property, it is possible that a prior deed was illegally made or signed by someone without authority to do so. Unless the deed is executed by someone with authority, it is not a valid conveyance.
- Deed following non-judicial foreclosure or part of a judicial proceedings, where required procedure was not followed or authorized by the appropriate court. Again, unless all of the proper regulations are followed, it is not a valid conveyance.
- Deed for property of deceased person, not joining all heirs or required parties. When a person dies, the ownership of their property may transfer to their heirs or beneficiaries named in their will. Sometimes, the heirs are missing or unknown, or a family member contests the will for their own property rights. This sometimes happens long after the property has been sold, and may affect your rights to the property.
- Undisclosed encumbrances. You may not learn until well after you have purchased the property that some third-party has an interest in the property, because of a former owner’s mortgage or lien, or because restrictions or covenants that limit your use of the property.
- Mechanic’s liens. This is a lien that is placed against a property by someone who has performed labor or provided materials that improved the property. The lien can be placed on the property several months after the work has been completed, even after the property has been sold.
- Unknown easements. While you may own the house and land, an unknown easement may prohibit you from using all or part of it as you desire, or an unknown easement may provide some other party access to all or part of your land.
- Undiscovered will. When a property owner dies without a will or heir, the state may sell the property, along with the rest of the decedent’s assets. If a will is later discovered, your rights to the property may be jeopardized.
- Boundary line or survey disputes. While you may have seen a survey for your property, other surveys may also exist. Those surveys may show different boundary lines to the property, thereby providing another party with an ownership claim to a portion of your property.