The owner’s title insurance policy isn’t mandatory when purchasing a piece of property. However, the decision to purchase or not, this type of policy can literally change your life for better or worse. For a one-time fee, the owner’s title policy protects against many types of defects, which can affect your ability to sell your home in the future.
If you’ve just applied for a mortgage to purchase a home, and the lender requires title insurance, the lender’s policy will only guard his interest in your property. Therefore, you’ll have no protection from different title defects unless you purchase an owner’s policy.
To understand the negative impact, some common title problems such as fraud, forgery, existing liens, encroachment issues, errors and omissions in surveys and public records can have on you and your property, let’s take a look at the three most important things you risk by not purchasing an owner’s title insurance policy.
- Paying debt that isn’t yours. Five years ago, Mr. Miller decided to renovate his kitchen before listing his home for sale. He soon received a great offer and signed the acceptance letter. In the midst of planning his move, he forgot to pay the contractor who had renovated his kitchen. The contractor placed a lien after the title insurance company hired by the buyer had performed the title search as part of the mortgage process. When the new owner wanted to sell the home several years later, the title search revealed the lien, which had been filed right before he became the legal owner of the property. Since the new owner purchased both types of title policies at the same time, the insurer took over the responsibility of settling the claim with the contractor in order to provide the homeowner with a clear and marketable title. A lien can result not only from unpaid contractor work but also from unpaid taxes, bills, mortgages and so on. An owner’s title policy can protect you from such liens, as long as they occurred prior to the issuing date of the policy.
- Losing part of your property due to encroachment issues. Property encroachment is more common than many people think. As an example, one of our clients has recently discovered that his neighbor’s double garage encroached on his land by three feet. Since the garage had been built long before our client bought the property and the surveying error remained undiscovered during the title search performed by our agents, we paid for a new survey to establish the exact property boundary lines. Based on the new survey, we negotiated a resolution with the neighbor, who agreed to correct the problem without legal proceedings.
- Losing the ownership of property. One of the most extreme situations I’ve come across is when people try to sell properties they co-own with other persons. There were many instances where sellers decided to sell the properties they had previously co-purchased with their brothers or spouses, without knowing they needed the signatures of the co-owners. A few months or years later, the co-owners showed up, claiming they were the rightful owners of the properties. If anything like that happens to you, and you have an owner’s title policy, your insurer will take care of the problem on your behalf. If you don’t have such a policy, you may lose the house to the brother or spouse claiming the property. An owner’s title policy will protect your ownership rights to your home in many other situations, including fraud, forgery, conflicting wills and missing heirs.
In summary, an owner’s title insurance policy is a relatively inexpensive tool that can help homeowners guard their property rights against a variety of potentially complex and costly issues, as long as they or their heirs have an interest in or an obligation with regard to that piece of property. As with any other type of insurance, levels of coverage can vary greatly. Therefore, be sure to ask exactly what’s covered and what’s not for the rate offered.
At Guardian Title and Trust, Inc., our experts are ready to answer any questions you may have about title insurance. Give us a call today at (904) 992-1162 or email firstname.lastname@example.org to find out more information about the legal and practical aspects involved in getting the right type of coverage for your property.