No home buyer wants to inherit existing debt when purchasing a piece of property. But in some situations, homeowners are served with notices for unpaid debt within months after purchasing a new home.
Since real estate is so valuable, special laws have been developed to safeguard the interests of all those who have rights in a piece of property, such as property owners and their families like you and your loved ones. But others may also have rights in a home. For example, a creditor, leaseholder, contractor or the government may have a right in a particular property based on a lien issued for unpaid mortgage, rent, work completed or taxes. Once the lien is solved, the lien holder’s right to the property ceases.
In my opinion, a very important aspect that you as a home buyer should be aware of is that a home can be sold when there is an existing lien, even without the knowledge of the lien holder. What’s more, you can buy real estate without knowing that other parties have a right in that property. If the lien isn’t discovered before the closing of the transaction, you become responsible for paying any existing debt.
Here is where title insurance comes into play. Title insurance provides protection against a variety of title defects undiscovered during the title search, including existing debt.
How Does Title Insurance Protect Homeowners against Existing Debt?
As soon as you sign the contract to purchase a piece of property, the title insurance company will perform a thorough title search, examining:
- the history of the ownership based on records pertaining to the property in question;
- any title defects relating to the documents filed, including potential forgeries on original documents, improper deeds, missing heirs and ex-spouses;
- other title-related problems, such as lawsuits, liens, divorces and probates filed against the current property owner.
If a lien occurred before the date of the policy, the title company has an obligation to honor the terms of the policy. This means that it must reimburse you for losses resulting from covered defects that existed at the time the policy was issued but weren’t discovered by the title agents during the examination of the public records.
Case Study: Last year, Mr. Hutchison purchased a new home here in Jacksonville, FL. After a few weeks, he received a notice about a pre-existing (yet unrecorded) lien filed by the roofing contractor who had replaced the roof four months before the house was sold. Without the owner’s title insurance, Mr. Hutchinson would have been responsible for paying the existing debt out of his own pocket. But since his policy also included mechanic’s liens, the claim was accepted and paid. This is just one example of how title insurance can protect you from existing debt.
In order to determine the status of a title, Guardian Title & Trust, Inc. conducts a diligent search of the public records for any documents associated with the piece of the property you intend to purchase. Therefore, you can rest assured knowing that the title insurance policy issued by our knowledgeable and experienced title agents protects you against any defects that are within the scope of the coverage. To learn more about our products and services, we invite you to get in touch with our professionals by calling (904) 992-1162 or emailing firstname.lastname@example.org.