There was once a young man who was relocating to the Washington, DC area. He had found the perfect home to start his new life in the nation’s capital. He came to terms with the seller, but, as a recent graduate with student loan debts, he decided to save some money by electing not to purchase an owner’s policy because he learned that the lender’s title company would need to conduct a full 60-year search of land records, court records, and bankruptcy courts.
There was trouble, though. The seller’s ex-wife told the new owner that she still had a claim on the home. When she divorced the seller, it was decided that when their house was sold, they would split the proceeds. This hadn’t happened because of some backdoor trickery from the seller. Things didn’t end well for our friend—things that could’ve been prevented had he purchased an owner’s title insurance policy. You can read more about this story here.
Title problems are few and far-between, but when they do arise, it can represent a major issue for homeowners; when a title conflict comes up, they tend to be very complicated. It may seem like an unnecessary expense to purchase an owner’s policy, especially when these costs can sum up to $1,000. However, the expense of not doing so can be much more costly—with the potential to even lose the home.
Title Problems are not common, but when they occur they are complicated legal matters that could end with you losing your house.
It should be noted that there are different types of policies. A lender’s title insurance policy, which is a policy that protects lenders from financial loss if there is ever a dispute that challenges a lien with protection equal to the loan amount. On the other hand, an owner’s title insurance policy provides protection equal to the purchase price, protecting the buyer against any title defects the previous owner may have created.
When you buy title insurance on your new property, a complete public records search is conducted. The investigator looks for anything that may have occurred in the past that would affect your ability to enjoy homeownership or access to the property. Such issues include:
- Old mortgages that were never paid off
- Previous foreclosures that weren’t processed correctly
- Bankruptcy issues
- Unpaid inheritance taxes
- Lost heirs who may have a claim on the property
- Previous tax sales where property owner never received legal notice
- Divorce issues where property was not properly conveyed from one spouse to another
- Unusual easements that give others access to use the property
- Unpaid contractors who have filed a mechanics lien
- Unpaid real estate taxes, unpaid municipal liens
- Unpaid IRS liens, unpaid state tax liens, etc.
As record-keeping practices continue to improve and homes continue to change hands, more title defects are cleared, and serious title issues are less common. But because of this, when an issue comes up, claim issues are a serious risk to homebuyers. This is why it’s important to protect your home and your investments. Whenever you have a major investment, you know how important it is to protect it—and since your home is the most important investment in your portfolio, protecting it with an owner’s policy will make sure you can settle into and live out your best life in your new home.