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Preperty Directory and
databases of real estate for sale and lease. |
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Title Insurance - Examples of Problems and Advice
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.
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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 per cent 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.
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