Someone Claims Ownership To Your Property ... Now What?

Two words: title insurance. We get asked all the time what title insurance is, and it's very simple; title insurance protects your title after a real estate transaction takes place. Our team does an impeccable job making sure that the title is clear before signing it over in the closing, but there are times when someone may come out of the blue and make a claim to your property.

There are two types of title insurance:

• Owner's Title Insurance – Covers the owner for their interest in the property. The best part is that it's a one-time premium, and it covers you for the whole time that you own the property. For example, when you're taking title to the property, it's conveyed to you from the prior owner. Let's say you put down $20,000 on a property. You want to make sure that your investment is protected. Your owner's title insurance protects you by making sure that the title is good. It's making sure that there are no prior owners of the property who still have an interest in the real estate (did not transfer out correctly). Other examples of title issues would be, heirs to an estate who still have an interest in the property which was not conveyed properly, conveyance (transfer) documents which were executed fraudulently and/or old mortgages which were never released.

• Lender's Title Insurance – Guarantees the lender that they are in first lien position. If the lender ends up having to take the property back for some reason down the road, they have insurance that they will have no problem doing so.

I have a great example of something we experienced first-hand a few years back where owner's title insurance really came in handy. We purchased our Maplewood office space back in 2009, after looking at two different office spaces in our complex at that time. We purchased and closed on our unit and then a couple of months later, we ended up doing the closing on the other unit in our same complex by coincidence. A few months later, the new unit owner received a summons and complaint from some random person from several years prior, claiming and asserting that they still possessed an ownership interest in the property.

Immediately, the title insurance kicked in for them. We assisted the customer in filing a claim with the title insurance underwriter, and the underwriter put an attorney in place to respond to the complaint right away. The litigating communication went back and forth for a series of a few months, and the claim ended up being dismissed and the party withdrew because they, in fact, didn't have a viable claim against the property. The end result was that the title insurance covered over $9,000 in attorney bills that had accrued during this time.

Now, this is just one instance of where title insurance kicks in. Other examples could be; the prior owner never paid off an old mortgage, or some documents were forged, and somebody, like an ex-spouse, comes along and wants to make a claim on the property. The title insurance defends the title; so whether you're ready to purchase your first property or your fifth, make sure you opt in for title insurance!