Title Insurance - Examples Of Problems And Advice
By Raynor James, Fri Dec 9th

What is title insurance and why should any buyer get it whenpurchasing a home (single family, townhouse, condo, apartment,or whatever format your home purchase takes)? Doesn't theattorney or settlement company handling the closing see to itthat you have a clear title? Isn't this just another way forsomeone to siphon a few coins off a real estate transaction?

Title Insurance

Title insurance prevents the property owner from sufferingfinancial loss if, at any time during his ownership of theproperty, someone comes along who can show that they have full,or partial, ownership of the property instead. Every mortgagelender I'm aware of requires title insurance be purchased tocover the amount of the mortgage. They're not in business tolose money.

A careful title search is done at the time property changeshands. On rare occasions mistakes



are made anyway. Property canchange hands in a number of ways including by deed, by will andby court action. Typically, these proceedings are recorded indifferent places. Searching the history of ownership to be surenothing has fallen through the cracks is a tedious job thatrequires alertness, intelligence, and skill. Mistakes canhappen. Fortunately they don't occur very often, but they dohappen.

A mistake of this kind happened a few years ago to some elderlyfriends of mine who owned a 136 acre parcel of farmland inStafford County, Virginia. It had been the home place, thefamily farm. The family had 10 children who inherited it on thedeath of their parents. After they became adults, one child, adaughter, bought out the interests of each of her siblings. Ather death, the property was conveyed by will to her three sons.One of her sons had died without a will which resulted in hiswidow and their 3 children gaining ownership of his one thirdinterest per state law.

My friend is the widow. She and her brothers-in-law wanted tosell the property. The area had begun to develop and each of thethree of them had significant health problems, so they decidedan influx of cash would be welcome. The property was masterplanned, but not yet zoned, for multi-family use. Being subjectto a rezoning complicated the sale, but the price reflected thechange in use. When the title work was done, it was discoveredthat the heir of one of the 10 children was still shown as a tenpercent owner of the property. Neither my friend nor herbrothers-in-law had title insurance. If the heir would not signa "quit claim deed," they were stuck with an additional owner.

Actually, this happened not once, but twice with the same familygroup. In one case, the aunt remembered that her parent had beenbought out and signed the quit claim deed. In the other case, acousin either did not know or refused to acknowledge what hadhappened and ended up getting ten per cent of the proceeds.

My suggestion is that you purchase title insurance because lackof it could prove devastating. You make a down payment. You makemonthly payments, an increasing portion of which is reducing theamount of principal owed. It is very likely that the value ofyour property will go up over the years. As time passes, theseelements are likely to result in your home equity's being yourlargest asset. Just how devastating would it be if youeventually discovered that someone else owned what you'd alwaysthought was your home?

Do yourself a favor. When you buy a home, buy title insurance.

What if the home you're purchasing is new? No one else couldhave owned it before you, right? Well, someone owned the land.As a matter of fact, the builder/developer probably had aconstruction loan on it, and they're often released in groups of10 lots at a time, so it's possible a bank has an interest inyour title. What happens if the bank goes bankrupt and you'releft trying to get a release from a trustee in bankruptcy?

Honestly, I'm not making this stuff up. I've seen this kind ofthing happen. Do yourself a favor. Buy title insurance.

About the author:Raynor James is with http://www.fsboamerica.org - providing FSBOhomes For Sale By Owner. Visit our "sell my home" page athttp://www.fsboamerica.org/seller.cfm to list and sell your homefor free for one month. Visithttp://www.fsboamerica.org/buyer.cfm to see homes for sale byowner.

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