When fearing the unknown is a good thing
Often referred to as the “fundamental fear,” there’s one time you should always act on your fear of the unknown, and that’s when you’re buying real estate. Enter title insurance. A solid title insurance company will search in the closet and under the bed to find any ghosts threatening your life’s biggest investment: your home.
Before you say, “Nah, that won’t happen to me,” consider this: 25 percent of all residential property transactions require “curative action” before closing, according to the American Land Title Association. That’s one in four people potentially and severely compromising their investment if they forgo title insurance.
Title insurance identifies defects and provides curative action
Title insurance serves to unearth the unknown, conquer the ghosts (more commonly called “defects”) that are discovered and protect you from any new specters that may come later. Any defect in the title to the property means remnants of the past may come forward and challenge whether the seller had the right to sell the land. Here are the five most common defects you’re likely to encounter.
Errors in public records.
Everybody makes mistakes, including all the people who have in the past processed documents related to your property. Clerical and filing errors, simple as they may be, can affect the deed or survey of your property. And that can be expensive to correct if not cured before closing.
Deeds are the instrument that conveys ownership of real estate. That means that if anyone in the history of the property ownership forged the deed, signed it without understanding what they were signing, signed it as a minor or if any fictitious persons are among past owners, the deed is void.
An encumbrance is any lien, easement, encroachments or deed restriction that limits an owner’s ability to transfer a property title.
- If any prior owner (we’re talking land here, too, not just homes themselves) failed to repay any loans, their lenders might have filed liens against the property, giving them possession rights until the debt is repaid.
- Several types of entities may have easement rights that limit how you enjoy your property. They could include utilities that need to be able to access lines on your property or the neighbor behind you that has as an easement to drive through your property to get to theirs.
- Sometimes neighbors may knowingly or unwittingly encroach on your property. It could be something like a fence placed a few inches within your property line or a driveway that’s partially on your parcel.
- Deed restrictions. Deed restrictions can be written in a way that lasts forever, from one owner to the next and the next. Deed restrictions often dictate how the land may be used. For example, a deed restriction can limit your ability to break off and sell smaller parcels of your land, or it can limit your ability to ever have a business on the property.
More than one version of your property survey may exist out there. In fact, you may find a few, all with differing boundaries, leaving your ownership open to dispute by another party.
Unknown wills and heirs.
Here’s where the ghosts can truly be haunting. Past owners may have bequeathed the property to long-lost heirs. And those long-lost heirs, or their posterity, may show up wanting to collect what is rightfully theirs.
Title insurance agents are the ghostbusters of the real estate industry
Whatever ghosts of the past may threaten your property ownership, title insurance is the best ghostbuster around. Before you close on any property, now or well into the future, be sure to partner with a reputable title company. Experienced title agents on their worst day are better than any medium on their best for clearing real estate ghosts from the past.