Understanding Title Companies
People often ask, “What does a title company do and why do I need one?”
A title company makes it possible for a homeowner to pass ownership (title) to a new owner. Buying a home is easily the largest single purchase a person will make in their lifetime, so it is crucial that no title surprises lurk behind the scenes. To protect the buyer, a title professional will search the public records for any problems with the home’s title. This search typically involves a review of land records going back many years. More than a third of all title searches reveal a title problem that title professionals fix before you go to closing. Here are a few real-life examples as to why it is important to purchase title insurance.
Fraud and forgery: Those involved in real estate fraud and forgery can be clever and persistent, which can spell trouble for a buyer. An innocent buyer purchased an attractive home site using a real estate agent, accepting a notarized deed from the seller. Then another couple, the true owners of the property, who lived in another locale, suddenly appeared and initiated legal action to prove their rightful ownership. Fortunately, the innocent buyer had purchased title insurance for a one-time fee at closing, which was provided by the title company to protect against financial loss.
As it turned out, the forger had spent time in advance at the local court house searching records to locate property that belonged to out-of-town owners. The individual involved then forged and recorded a deed to a fictitious person and assumed the identity of that person before listing the property for sale to an innocent purchaser.
Fraud and forgery are examples of hidden title hazards that can remain undetected until after a closing despite the most careful precautions. An Owner’s Title Policy protects you financially from such hazards and will pay all valid claims.
Conflicting wills: After purchasing a home, the new owner was startled when the seller’s brother claimed an ownership interest in the house. It seemed that their late mother had deeded the house to the son making the challenge, who had placed the deed in his drawer without recording it at the courthouse. Some 20 years later, after the death of the mother, the deed was discovered and recorded.
Permission was granted in probate court to remove the property from the late mother’s estate, and the brother to whom the residence initially was given sold the house. But the other brother appealed the probate court decision, claiming their mother really did not intend to give the house to his sibling. Ultimately, the appeal was upheld and the new owner faced a significant financial loss. Since the new owner held an Owner’s Title Insurance Policy, obtained upon purchasing the real estate, the title company paid the claim, along with an additional amount in legal fees incurred during the litigation.
Open judgments and prior open mortgages: Home purchasers and their lenders need assurance that they are in first position – that is, no prior mortgage or lien will come before the new owner’s interest. Invariably, when we search title, we find unreleased prior mortgages. How does that happen? Sometimes prior lenders neglect to record releases, or releases are issued but are not recorded. Title insurance comes to the rescue here. Similarly, with open judgments against prior owners, it can happen that judgments are paid but not released. Sometimes judgments are missed in the title search, particularly where common names are involved.
Additionally, mistakes are made with ground rents, a topic for another article but nevertheless a factor that we deal with on many Maryland properties.
Title searches include searches in bankruptcy proceedings, federal and state courts, mechanics liens, and, recently, federal terrorist watch lists. We at CLEAR TITLE GROUP strive to provide clear title to all those who use our service. Our company is backed by national underwriters who guaranty and insure our work and, ultimately, the title policy that we issue. It will be our pleasure to answer any questions that Where What When readers may have.
© Clear Title Group, 106 Old Court Road, Baltimore, MD 21208, 410-486-5456.
