Have you ever dreamed that you inherited the estate of a long-lost relative? That does happen. Now imagine that you are on the other side of the scenario, and your newly purchased home legally belongs to someone else. That happens as well, especially in jurisdictions as old as DC, Maryland, and Virginia, and it is one of the reasons that title insurance is a wise investment. If you have owner’s title insurance, this matter is covered and not a concern. Without this policy, the buyer is now responsible for hiring an attorney, and possibly paying off this newfound owner.
Yes, this scenario is rare, but title issues are not uncommon. Until the 1990’s deeds were not required to be detailed. A home could have been purchased by John and Sue Doe and sold by John and Elizabeth Doe, with no explanation of what happened to Sue, or documentation of Elizabeth (new wife? daughter?). This creates a broken chain of ownership which needs to be resolved. Unreleased mortgages or judgments against a home are also common. In most instances, the mortgage of a previous owner has been paid off, just not processed correctly. Your title insurance company will investigate and resolve the matter. Without a policy, the seller will need to research and fix the issue, which can get complicated, timely, and expensive, especially if banks have closed or changed ownership. You may ask, wouldn’t these issues have been uncovered during a previous title search? Title issues are usually discovered when you are selling a home and time is of the essence. Because title searches are done by humans, mistakes do occur and omissions are overlooked.
Many buyers falsely believe that an owner’s policy is unnecessary since banks require the purchase of lender title insurance. Even the Sales Contract in the Title Insurance section states that “nothing herein obliges Buyer to obtain any owner’s title insurance coverage…” Buyers must understand that the lender’s policy only protects the lender and provides no coverage to the homeowner. In fact, if a home were to go into foreclosure, the lender’s policy in effect becomes the bank’s owner’s policy. Once the property is in your name, you are responsible for any matters regarding title, and without an owner’s policy, you are on your own.
Title insurance is a one-time purchase, with no monthly premiums. It covers the owner’s interests until the home is sold. Your home is likely your largest investment. Title insurance protects you from risk, financial loss and legal issues. Besides your home, it may be the best investment you can make.
If you’d like to work with real estate agents who address and protect your every interest or if you have questions about the real estate market, title insurance, or lending options, contact us today! We are here to help.