What is title insurance and why should any buyer get it when
purchasing a home (single family, townhouse, condo, apartment,
or whatever format your home purchase takes)? Doesn't the
attorney or settlement company handling the closing see to it
that you have a clear title? Isn't this just another way for
someone to siphon a few coins off a real estate transaction?
Title Insurance
Title insurance prevents the property owner from suffering
financial loss if, at any time during his ownership of the
property, someone comes along who can show that they have full,
or partial, ownership of the property instead. Every mortgage
lender I'm aware of requires title insurance be purchased to
cover the amount of the mortgage. They're not in business to
lose money.
A careful title search is done at the time property changes
hands. On rare occasions mistakes are made anyway. Property can
change hands in a number of ways including by deed, by will and
by court action. Typically, these proceedings are recorded in
different places. Searching the history of ownership to be sure
nothing has fallen through the cracks is a tedious job that
requires alertness, intelligence, and skill. Mistakes can
happen. Fortunately they don't occur very often, but they do
happen.
A mistake of this kind happened a few years ago to some elderly
friends of mine who owned a 136 acre parcel of farmland in
Stafford County, Virginia. It had been the home place, the
family farm. The family had 10 children who inherited it on the
death of their parents. After they became adults, one child, a
daughter, bought out the interests of each of her siblings. At
her death, the property was conveyed by will to her three sons.
One of her sons had died without a will which resulted in his
widow and their 3 children gaining ownership of his one third
interest per state law.
My friend is the widow. She and her brothers-in-law wanted to
sell the property. The area had begun to develop and each of the
three of them had significant health problems, so they decided
an influx of cash would be welcome. The property was master
planned, but not yet zoned, for multi-family use. Being subject
to a rezoning complicated the sale, but the price reflected the
change in use. When the title work was done, it was discovered
that the heir of one of the 10 children was still shown as a ten
percent owner of the property. Neither my friend nor her
brothers-in-law had title insurance. If the heir would not sign
a "quit claim deed," they were stuck with an additional owner.
Actually, this happened not once, but twice with the same family
group. In one case, the aunt remembered that her parent had been
bought out and signed the quit claim deed. In the other case, a
cousin either did not know or refused to acknowledge what had
happened and ended up getting ten percent of the proceeds.
My suggestion is that you purchase title insurance because lack
of it could prove devastating. You make a down payment. You make
monthly payments, an increasing portion of which is reducing the
amount of principal owed. It is very likely that the value of
your property will go up over the years. As time passes, these
elements are likely to result in your home equity's being your
largest asset. Just how devastating would it be if you
eventually discovered that someone else owned what you'd always
thought was your home?
Do yourself a favor. When you buy a home, buy title insurance.
What if the home you're purchasing is new? No one else could
have owned it before you, right? Well, someone owned the land.
As a matter of fact, the builder/developer probably had a
construction loan on it, and they're often released in groups of
10 lots at a time, so it's possible a bank has an interest in
your title. What happens if the bank goes bankrupt and you're
left trying to get a release from a trustee in bankruptcy?
Honestly, I'm not making this stuff up. I've seen this kind of
thing happen. Do yourself a favor. Buy title insurance.
More Information:Visit
http://www.fsboamerica.org/ for more details.
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