To Rent or to Buy, that is the question.February 9, 2017
WHY BUY AN OWNER’S TITLE INSURANCE POLICY?
Title Insurance is a policy of indemnity protecting homeowners and lenders from financial loss in the event that certain problems develop regarding the right to ownership of property.
There are two types of title insurance—lender’s and owner’s:
Lender’s policies are required by every public mortgage lender. This policy of insurance only protects the interest of the lender as evidenced by its mortgage.
An owner’s policy protects the owner and insures against such title defects as un-discharged mortgages, liens, incorrect legal descriptions, improper recording of deeds, forged deeds, and sudden appearance of unknown heirs claiming an interest in the property.
During a title search, a professional examiner searches through public records looking not just at the chain of ownership but also other issues that might affect whether title can be cleanly delivered to a future owner.
Title defects include forged deeds and phony notarizations; for example, did both husband and wife sign the deed? If not, absent some legal explanation, the non-signer might have a claim against your house.
For example, imagine that you bought a house and are settled in. One day, a woman knocks on your door and says that she and her husband had split up shortly before he put the house on the market, and that he forged her name on the deed. She says the sale was invalid and that she’s still the owner—and she wants you out! You go to court, she proves her story is true, she gets the house back, you are evicted.
Or imagine that you discover after closing that there are “clouds” against the title, like liens for unpaid contractor bills, or legal judgments or taxes, or undisclosed leases or restrictive covenants, or clerical errors.
Having an owner’s title policy means that your title to the property will be defended in court should anyone bring a challenge on any of the covered issues.