Ever wondered why you need title insurance? Your home might be new to you or even look brand new, but every home has its history. A thorough title search can help you uncover any defects your property might have. Luckily—subject to the terms of the policy—your title insurance provides protection for you from title problems that may come to your attention after closing.
Some of these common title issues are when buying a house include the following:
1. ERRORS IN PUBLIC RECORDS
It’s certainly possible that there are mistakes in public records, but when it affects your home ownership rights, these mistakes can have negative consequences for you. Clerical or filing errors can cause undue financial strain to solve.
2. UNKNOWN LIENS
If prior owners of your new property were not thorough bookkeepers or prompt bill payers, banks or other financing companies can place liens on your property for unpaid debts… even after you have closed on a sale! This can be an especially troubling issue with distressed properties.
3. ILLEGAL DEEDS
The chain of title on your property may appear perfectly sound, but it's possible that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or one who is reported single but in actuality married. These things may affect the enforceability of prior deeds, affecting prior (and possibly present) ownership.
4. MISSING HEIRS
Sometimes when a person leaves the ownership of their home to heirs, the heirs cannot be found. Other times, family members might contest a will for their own property rights. These things can happy long after you purchase the property, and can even affect your rights to the property.
Unfortunately, sometimes forged documents that affect property ownership can be filed with public records. This can obscure the rightful owners of the property, and once these forgeries come to light, your rights to the house could be compromised.
6. UNDISCOVERED ENCUMBRANCES
When you purchase a property, you might not be aware that a third party holds a claim to all of some of your property. This could be due to a former mortgage lien, or non-financial claims, like restrictions or covenants limiting the use of your property.
7. UNKNOWN EASEMENTS
Even if you own your home and surrounding land, an unknown easement could prohibit you from using how you’d like. Government agencies, businesses, or other parties could have access to all or portions of your property. While usually non-financial issues, easements can still affect your right to enjoy your property.
8. BOUNDARY/SURVEY DISPUTES
Even if you saw several surveys of your property prior to purchasing, there could be other surveys out there that show different information. It’s possible that a neighbor or other party may be able to claim ownership to a portion of your property.
9. UNDISCOVERED WILL
If a property owner dies without a will or heir, the state can sell their assets. If you purchase the home, you assume rights as owner. However, if years later it’s discovered that the deceased owner has a will that left the property to someone… your rights to the property could be compromised.
10. FALSE IMPERSONATION OF PREVIOUS OWNER
A property owner could be falsely impersonated by someone with a common or similar name. If you purchase a home that was once sold by a false owner, you can risk losing your legal claim to the property.
PLAY IT SAFE
These and other issues are often covered by an owner's policy of title insurance. When you buy a home, make sure you're protecting that investment with title insurance!