Congratulations, you’ve found your dream home! The seller accepted your offer, you’ve officially closed on the house, and you’ve got the keys and are moving in. But just as you begin to settle in, there’s a knock at the door and you get notice that a pre-existing lien had been placed against the property for something caused by the previous homeowner, which has now been passed on to you.
But then you remember that you paid for something at the closing that was for title insurance – you think – and you call your realtor to confirm. But your realtor informs you that your Lender required that you purchase a Lender’s policy – to protect their interests in your property – but that you declined the Owner’s policy because you were trying to save a few bucks and cut closing costs.
Now what do you do?
Well, at this point, you’re left with the option of paying the bill you have now inherited, or attempt to go to court to avoid paying it, which could end up costing far more than the actual lien amount.
Here are the 4 most common situations that new homeowners face where having Owner’s title insurance will save you from a migraine.
(1.) Naughty Neighbors: Your neighbor has built a shed/garage/pool/driveway/etc that is partly on your property.
(2.) Hidden Heirs: Perhaps the previous homeowner passed away or there was another family member with ownership rights to the house that wasn’t notified the house was being sold. You could lose out big time if the house was actually sold to you “illegally”.
(3.) Unpaid Taxes: Although an initial tax search may not show any past due amounts initially, perhaps the tax collector’s office accidentally provided the wrong information (yes, it happens) and mistakenly omitted or miscalculated the amount owed. Guess who pays for that mistake? Hint: it’s not the municipality or the title company – it’s you.
(4.) Mystery Mortgage: Just like with a lien or unpaid taxes, it’s possible that a title search may not turn up another mortgage on the property until after the closing has happened.
Although all efforts by the title company and municipality are to ensure to the best of their ability that the above situations are avoided, but things happens, sometimes out of our control. The biggest takeaway here is to make sure that you’re protected and your home is protected. And the way to do that is to take out a Owner’s title insurance policy on your home to protect that investment.