70 Ways To Lose Your Home Why Title Insurance Is Important

Dated: 08/15/2016

Views: 83

Title companies say that in more than one-third of all real estate transactions they must undertake “extraordinary work” to address title issues and ensure the deal makes it to settlement OK.

Title companies will often scour public records back 50 years or more to look for past deeds, wills, divorce decrees, bankruptcy filings, court judgments, trusts, and tax records that could be defective or outstanding.

From that search, unresolved title issues can surface. And, any unresolved title issue – even if relatively minor – could jeopardize settlement. Here are some common issues title companies say pop up:

Mechanic liens: These are liens placed against a property that a general contractor or someone who worked to improve the home filed before beginning the work. This is to ensure the contractor gets paid, and the lien is to be released when the job is complete. The procedure for how mechanic liens are filed and processed vary widely from state to state. But problems can surface with these liens when the contractor doesn’t file a “satisfaction” of the lien and, thereby, the lien remains on the property title. Some mechanic liens will expire after a certain amount of time. Regardless, if a mechanic lien is still present when trying to go to settlement, the process can be time-consuming and could prompt a delay in closing. 

Bankruptcies: This can be cause a problem, for example, when a seller buys a home while single but then marries someone with a recent bankruptcy. The title company must ensure the new spouse has signed off on the deed and also that the bankruptcy case has been discharged. If not, the title company would need to petition the court to release the property from the bankruptcy process.

Divorces: This often causes problems when a divorced spouse doesn’t remember to remove a lien for child support, even though the debt may have been resolved long ago.  Also, lien issues may arise from past-due spousal support or delinquent taxes.

Your title insurance policy protects you against potential defects such as: 

  1. Forged deeds, mortgages, satisfactions, or releases  

  2. Deed by person who is insane or mentally incompetent

  3. Deed by minor (may be disavowed)

  4. Deed from corporation, unauthorized under corporate by-laws or given under falsified corporate resolution

  5. Deed from partnership, unauthorized under partnership agreement

  6. Deed from purported trustee, unauthorized under trust agreement

  7. Deed to or from a “corporation” before incorporation, or after loss of corporate charter

  8. Deed from a legal nonentity (styled, for example, as a church, charity, or club)

  9. Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized, or defective under foreign laws

  10. Claims resulting from use of “alias” or fictitious name style by a predecessor in title

  11. Deed challenged as being given under fraud, undue influence, or duress

  12. Deed following nonjudicial foreclosure, where required procedure was not followed

  13. Deed affecting land in judicial proceedings (bankruptcy, receivership, probate, conservatorship, dissolution of marriage)  unauthorized by court

  14. Deed following judicial proceedings subject to appeal or further court order

  15. Deed following judicial proceedings where all necessary parties were not joined

  16. Lack of jurisdiction over persons or property in judicial proceedings

  17. Deed signed by mistake (grantor did not know what was signed)

  18. Deed executed under falsified power of attorney

  19. Deed executed under expired power of attorney (death, disability, or insanity of principal)

  20. Deed apparently valid, but actually delivered after death of grantor or grantee, or without consent of grantor

  21. Deed affecting property purported to be separate property of grantor, which is in fact community or jointly owned property

  22. Undisclosed divorce of one who conveys as sole heir of a deceased former spouse

  23. Deed affecting property of deceased person, not joining all heirs

  24. Deed following administration of estate of missing person who later reappears

  25. Conveyance by heir or survivor of a joint estate who murdered the decedent

  26. Conveyances and proceedings affecting the rights of service member protected by the Service-Members Civil Relief Act

  27. Conveyance void as in violation of public policy (payment of gambling debt, payment for contract to commit crime, or conveyance made in restraint of trade)

  28. Deed to land including “wetlands” subject to public trust (vesting title in government to protect public interest in navigation, commerce, fishing, and recreation)

  29. Deed from government entity, vulnerable to challenge as unauthorized or unlawful

  30. Ineffective release of prior satisfied mortgage due to acquisition of note by bona-fide purchaser (without notice of satisfaction)

  31. Ineffective release of prior satisfied mortgage due to bankruptcy of creditor prior to recording of release (avoiding powers in bankruptcy)

  32. Ineffective release of prior mortgage or lien, as fraudulently obtained by predecessor in title

  33. Disputed release of prior mortgage or lien, as given under mistake or misunderstanding

  34. Ineffective subordination agreement causing junior interest to be reinstated to priority

  35. Deed recorded but not properly indexed so as to be locatable in the land records

  36. Undisclosed but recorded federal or state tax lien

  37. Undisclosed but recorded judgment or spousal/child support lien

  38. Undisclosed but recorded prior mortgage

  39. Undisclosed but recorded notice of pending lawsuit affecting land

  40. Undisclosed but recorded environmental lien

  41. Undisclosed but recorded option, or right of first refusal, to purchase property

  42. Undisclosed but recorded covenants or restrictions, with (or without) rights of reverter

  43. Undisclosed but recorded easements (for access, utilities, drainage, airspace, views) benefiting neighboring land

  44. Undisclosed but recorded boundary, party wall, or setback agreements

  45. Errors in tax record (mailing tax bill to wrong party resulting in tax sale, or crediting payment to wrong property)

  46. Erroneous release of tax or assessment liens, which are later reinstated to the tax rolls

  47. Erroneous reports furnished by tax officials (not binding local government

  48. Special assessments which become liens upon passage of a law or ordinance, but before recorded notice or commencement of improvements of which assessment is made

  49. Adverse claim of vendor’s lien

  50. Adverse claim of equitable lien

  51. Ambiguous covenants or restrictions in ancient documents

  52. Misinterpretation of wills, deeds, and other instruments

  53. Discovery of will of supposed intestate individual, after probate

  54. Discovery of later will after probate of first will

  55. Erroneous or inadequate legal description

  56. Deed to land without a right of access to a public street or road

  57. Deed to land with legal access subject to undisclosed but recorded conditions or restrictions

  58. Right of access wiped out by foreclosure on neighboring land

  59. Patent defects in recorded instruments (for example, failure to attach notarial acknowledgment or a legal description)

  60. Defective acknowledgment due to lack of authority of notary (acknowledgment taken before commission or after expiration of commission)

  61. Forged notarization or witness acknowledgment

  62. Deed not properly recorded (wrong county, missing pages or other contents, or without required payment)

  63. Deed from grantor who is claimed to have acquired title through fraud upon creditors of a prior owner

    And extended coverage may be requested to protect against such additional defects as:

  64. Deed to a purchaser from one who has previously sold or leased the same land to a third party under an unrecorded  contract, where the third party is in possession of the premises

  65. Claimed prescriptive rights, not of record and not disclosed by survey

  66. Physical location of easement (underground pipe or sewer line) which does not conform with easement of record

  67. Deed to land with improvements encroaching upon land of another

  68. Incorrect survey (misstating location, dimensions, area easements, or improvements upon land)

  69. “Mechanics’ lien” claims (securing payment of contractors and material suppliers for improvements) which may attach without recorded notice

  70. Federal estate or state inheritance tax liens (may attach without recorded notice)

  71. Preexisting violation of subdivision mapping laws*

  72. Preexisting violation of zoning ordinances*

  73. Preexisting violation of conditions, covenants, and restrictions affecting the land*

So think again when you say you don't need title insurance.

Blog author image

LaDawn Westbrook

With more than a decade of experience, LaDawn enjoys educating first time home buyers, working with the 55+ community, relocation clients, sellers who want to downsize, step up purchase or anything in....

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