Throughout my career, I’ve heard many home-buying horror stories that could have been easily avoided with title insurance. I particularly remember Mr. and Mrs. Smith, a really nice couple who found their dream home here in Jacksonville, FL. A few months after the closing, they received a letter about a pre-existing lien on the home, which carried over to them as the new owners. Mr. Smith had to pay almost $3,500 to have the lien removed.
Just like Mr. and Mrs. Smith, many home buyers learned the hard way that title insurance could have protected them against a series of title defects. Though a thorough title search, which involves reviewing all the documents associated with the property (e.g. home appraisals/inspections, taxes, judgments, etc.), is usually performed in real estate transactions, many errors may remain hidden. Since these errors can turn the sweet dream of owning a home into a financial nightmare, getting a title policy is very important to protect yourself from potential losses. Below are the three most common issues covered by this type of insurance.
- Errors in public records – A “small” clerical error can negatively impact the home-buying process and may result in significant financial loss. For instance, if the actual square footage of the property you intend to purchase is less than the footage recorded, and the error is found during the title search, the mortgage company will approve your home loan only after the error is corrected. On the other hand, if the error is discovered when you sell the property, you may need to sell it for less than what you’ve initially paid. Since even the most thorough title search may fail to find certain title defects, getting title insurance is the only way to protect your investment.
- Liens and judgments – To get protection against liens, judgments and any other form of debt that may become your responsibility after the closing, you need to purchase two types of insurance policies: a policy to protect the lender (required only if you take out a mortgage to pay for the house) and a policy to protect yourself. If you pay for an owner’s policy, the title insurance company is obligated to reimburse you for losses resulting from title-related events that occurred before you purchased the property and are covered by the policy. To get compensated, it’s imperative that you follow certain claim-filing procedures, as I explained in the previous post, Title Insurance Claim Procedures.
- Invalid deeds and claims of ownership – A title policy will also protect you from invalid deeds (e.g. deeds attesting transfers of property titles from former owners declared mentally incompetent or from previous sellers, who didn’t actually own the property, to new owners) and from claims of ownership made by other parties, such as ex-spouses, undisclosed heirs, etc. When such a claim is filed against you, the title insurance company will defend your legal rights, in accordance with the terms of the policy. If the claim proves valid, the company will reimburse you for your actual loss, up to the face amount of the policy.
To make the most of title insurance coverage, I strongly advise you to get your title policy from a reputable ALTA-certified company, such as Guardian Title & Trust, Inc. Besides an impressive track record of success, we have engaged title professionals who are ready to put your interests above all else and the financial strength to protect your rights should a claim arise. Contact us today and you’ll find out why Guardian Title & Trust, Inc. is the right title insurance company for you.