Are you buying a home in the Fort Myers or Cape Coral areas? If you ever questioned why title insurance matters here are a few examples of when it came in handy.
While Homeowners Insurance covers loss or damage to your home, structures on your property, personal property, and provides liability protection for accidents that occur on your property, Title Insurance for owners is quite different.
Simply stated, Title Insurance is protection against a broad array of issues that can threaten the ownership of your property including liability for violations that happened before you purchased the property.
There are two types of title insurance policies. A lender’s policy protects your mortgage lender’s interest in your property up to the amount of the loan. However, the lender’s title insurance will not cover many issues that are covered by the lesser known owner’s title insurance policy. The owner’s policy addresses the homeowner’s liability and exceeds the loan amount up to the purchase price of the property. It’s an inexpensive and essential bit of insurance to have…because strange things do happen that only your owner’s title policy will cover.
Not The Right Mr. Jones
The real estate sale was uneventful. The buyer’s moved in, life went on, until about a year after the sale a gentleman knocks on their door demanding to know why they were living in his home. Turns out the gentleman’s son was supposed to be caring for the house while he was working overseas. Instead, the son forged his father’s signature, sold it, and kept the money. The forgery was facilitated by the fact that the son was a junior so the name on his ID matched all the legal documents.
The title insurance policy covered the father for the value of his home and the issuing title company pursued monetary restitution from the son for the money he received after he illegally sold his father’s house.
They Built The House In The Wrong Place
A Real Estate Attorney shared in a chat an incident in which the original house was built in the 1930s. In 1998 a second owner attempted to sell the home only to be informed by the buyer’s bank that the house had been built on the wrong lot. Apparently, property lines and lots got jumbled a lot in this area in the early 1900’s and this error in the deed wasn’t discovered when the first owner sold it.
And it was a big error. Fortunately, the second owner had title insurance. The issuing title company took on the task of tracking down the original owner’s son for signatures to fix the problem. All the research, the document preparation, plus the attorney and registry fees were covered by the title insurance policy.
The Walking Dead
An older woman passed away leaving her substantial home to her six remaining sons. Wanting a quick sale, they priced the home attractively and soon enough new owners were in place. The proceeds were divided among the six brothers, since the seventh brother was a sea captain that had been declared legally dead after having gone missing at sea for over a decade.
Sometime later, the sea captain, who was very much alive, attempted to visit the home only to discover his mother was gone and the house had been sold to strangers. He promptly sued the new owners for his inherited share of the home. Thankfully, with owner’s title insurance in place, the new owners could rely on the title company to navigate the complex legal situation and reach a resolution.
Happens Much Too Often
The last example is not at all strange. In fact, it is compelling for the opposite reason, it highlights a common risk homeowner’s have when they bypass an owner’s title insurance policy. Mr. Ford, nearing retirement uses a big portion of his life savings to buy a beautiful plot of land in the country. The plan is to build his dream home and enjoy a peaceful retirement. Shortly after closing, he discovers that the prior owner had not paid an undiscovered lien against the property. Mr. Ford is suddenly accountable for a $100,000 debt.
During the purchase of the property, Mr. Ford had been required to purchase title insurance for the benefit of his lender, which meant the bank was protected from any loss related to the property. However, Mr. Ford did not know he had an option to purchase owner’s title insurance which would have released him from liability and saved him from a financial disaster.
Peace of Mind
Whether through intentional fraud, sheer error, or incompetence, important factors can be missed during a real estate transaction. These situations can be legally complicated and very stressful. While purchasing an owner’s title insurance policy is optional, it can be the one small investment that saves you from living a title related nightmare.
At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.
In case you missed it, check out our last Title Junction post: Calculating Your Cash To Close.