Why You Need Title Insurance
Why do you need title insurance? To protect possibly the most important investment you'll ever make - the investment in real estate.
Fire insurance protects you against losses from fire. Collision insurance guards against the cost of a damaged car. But, unlike other types of insurance which protect the insured against loss due to unexpected future events, title insurance protects against loss which may occur due to events that took place in the past. Specifically, title insurance protects the buyer against loss resulting from previously unreported land title defects, such as forgeries, claims by missing heirs, recording errors, etc.
Most home sellers and buyers have been informed that obtaining title insurance will provide them necessary protection over possible title defects; but many remain uncertain about why this is so - or even about what title insurance is all about. At Title West, we believe we have everything to gain by throwing some light on the subject. The more you know about title insurance, the more confident you'll be about coming to Title West for a policy.
When you buy a home, you want to be certain that it is safely yours. But even the most diligent search of the public records could fail to disclose a number of title defects such as a forged will or deed, a title transfer by someone under age, or a married person conveying real estate without his or her spouse.
Fraudulent impersonations. Secret marriages. Undisclosed heirs. Invalid divorces. False affidavits. The list of potential problems that can surface goes on. Without the protection of title insurance, you'll be in jeopardy of losing your investment. Listed below are some real life examples of why you need title insurance.
The Walking Corpse:
The homeowner was a widow with seven sons. One of her offspring, the captain of a fishing vessel, had not been heard from for many years. Presumed lost at sea, he was declared legally dead. When the widow passed away, her six remaining sons inherited her home. It was an attractive house, and they put it on the market at a modest price to facilitate settlement of the estate.
Recognizing a bargain, the Montgomerys bought the property.
They were delighted with their new home - until the long lost sea captain returned from the dead. It turned out the widow's missing son had decided years ago to start a new life elsewhere. When the captain eventually returned and found the house had been sold, he promptly filed a claim against the Montgomerys for his rightful share of the property.
News Travels Slowly:
A lady of means placed her home in the country up for sale. Before embarking on a cruise, she gave her lawyer power of attorney on the property. Weeks later, the Harper family decided to buy the country place. Its fertile land and picturesque setting were ideal for farming. Exercising his authority, the attorney signed the deed and sold the property to the Harpers.
Everything appeared proper, except for one hitch: The woman died in a distant part of the world before the attorney signed over the property. When the lady's heirs discovered that the land had been sold after her death, they claimed the deed was invalid and demanded their right to the property.
The Refined Forger:
The Carters were charmed by the elderly lady. Impeccably mannered, she explained that her country home had been vacant for some time, so she was letting it go at an irresistible price.
The Carters leaped at the offer, only to find out later they were unwitting victims of a classic forgery caper.
More cunning than charming, the old woman had learned that the real owners of the country home were living in Europe. She forged a deed to the property and had it recorded in her own name. Her low asking price assured a quick sale.
By the time the Carters were made aware of the scam, the little old lady was long gone.
John's Other Wife:
John and Maxine were an ideal couple: pleasant, personable, respected among their peers. They made quite an impression on Mr. and Mrs. Denton, who purchased their home.
The Dentons were less impressed, however, when they heard from John's real wife.
It seems that Maxine wasn't John's wife but his mistress, which meant that the deed of ownership she signed was invalid. The Dentons did eventually meet John's legitimate wife - in a court of law when she claimed her legal right to the property.
How Title Insurance Protects
Are homeowners helpless against these and other pitfalls? Absolutely not. You can safeguard your real estate investment against these and other "horrors" with an owner's title insurance policy issued through Title West.
First, a service known as a title search describes the condition and quality of the title to the land you are buying. Then, your title insurance protects you against mistakes or threats that might otherwise result in financial loss to you - including those hidden, unknown items.
Your title insurance protection is a permanent assurance that your ownership and use of the property will be defended promptly against claims at no cost to you, whether the claim is valid or not.
Who Title Insurance Protects
There are two basic types of title insurance protection - one for the mortgage lender and one for the homeowner or real estate investor. If a mortgage is to be placed on your new home, the mortgage lender will probably require that you purchase title insurance to protect the institution's position as a holder of a mortgage loan. But this mortgagee's title insurance policy doesn't protect you, the homeowner. You need an owner's title insurance policy to protect your investment.
You pay only once. There are no renewal premiums, and there is no expiration date on the policy. Yet the protection lasts as long as you, or your heirs, retain an interest in the property.
A Small Cost for Years of Protection
The real estate you own represents stability, permanence and the hope of the future. Don't take a chance and let your property be taken from you because of a flaw in the title. It makes good sense, for the relatively small amount it costs, to protect yourself with title insurance.
What Title Insurance Protects Against
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deeds, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes