We are often asked why home buyers should pay for owner’s title insurance when the lender already requires its own policy. In the answer that follows, a story is related that should convince anyone of the value of having owner’s title insurance.
A young man was relocating to the Washington D.C. area. He found the perfect home to start this new chapter of his life and quickly came to terms with the seller. As a recent graduate burdened heavily with student loans, this young man thought he might save some money by not buying an owner’s policy after learning that the lender’s title company was going to conduct a full 60-year search of the land records, the court records, and the bankruptcy courts.
The trouble started a month after closing when the ex-wife of the seller showed up at the house. She informed the new young owner that she and her ex-husband had purchased the home as newlyweds but soon separated. She moved to Nevada to start over, where she filed for and obtained a divorce. The divorce settlement dictated that in the event the home was sold, both parties would split the proceeds. Nothing was ever recorded in the Recorder of Deeds Office in the District, and because the divorce was in Nevada, nothing showed up when the title company searched the D.C. court records.
As it turned out, the seller had his current girlfriend pose as his ex-wife and forge the required paperwork for listing and selling the property. By the time the ex-wife received the certificate of satisfaction from the mortgage company, the seller had wired the proceeds of the sale to an offshore bank account and disappeared to another country.
Because the ex-wife never signed her name to the deed she still owned half of the home. And since the new owner didn’t buy an owner’s policy, he was left without the protection an owner’s policy would give. For instance, the title company would have covered the purchase of the exwife’s interest in the property to benefit the policyholder in this case. But unfortunately there was no owner’s policy, because the young man thought he was covered by the lender’s policy and tried to save a little money at closing.
The moral of the story – don’t take chances when buying property and make sure you are receiving advice from an experienced title insurance company to help you make the right decisions to best protect your interests.