Good Morning to all. In this week’s edition of Frank’s soon to be world famous real estate blog I will address one of the best reasons I have ever encountered to purchase an Owner’s Title Insurance policy (OTP) at a residential real estate closing.
The following true story illustrates perfectly the unquestionable value of OTP to the purchaser. The facts are true, but the names have been changed to protect the innocent, (and the guilty).
John Blackacre and Susan Blackacre purchased a home in a subdivision in 2004. Three years later, a lawsuit was filed against Mrs. Blackacre, for an old credit card debt, under her maiden name, Susan Seisin. Judgment was obtained against her and a Fifa was filed in the deed records of the county, again under her maiden name only. Now, skip ahead 7 years and the judgment Fifa is re-filed according to law, but still with no mention of her new name, which at this point in time she has had for more than 10 years!
Jump now to present day and Mr. and Mrs. Blackacre decide to sell the home they have lived in for 13 years. Title exam is performed by the closing attorney and no unforeseen liens or judgements are discovered against John or Susan Blackacre. The sale closes without issues.
Two months later, the creditor contacts closing attorney to inquire as to why the Fifa was not paid at closing, and demanding payment!
The title insurance company counsel is alerted, and it is quickly determined that the Fifa filed against the owner, but under her maiden name, does not give notice to anyone examining the title, and as such, does not attach to the land. The title insurance company agreed to defend the claim.
So, in English, the moral of the story is that it’s not only “missing heirs from Grandma’s farm” or “unpaid materialmen”, or “unsatisfied security deeds” that cause title claims. Sometimes the claims come from places that could not ever be discovered. Sometimes the sellers are truly unaware a problem exists.
So, the next time you purchase a home, or talk to someone who is purchasing a home, remind them that title insurance, which at the time seems like a colossal waste of money, is in fact a smart investment in continued peace of mind.