The One Where the Title Company forgot to Collect for the Mortgage
DISCLAIMER: The title company listed above was not Hywater…. but we can all learn something from this.
What is title insurance? Real estate title insurance is a type of insurance policy that provides protection to homeowners and lenders against financial loss or legal action related to defects or challenges to the ownership of a property. It is a common requirement for homebuyers and lenders in the United States and is typically purchased at the time of a property purchase or refinance.
Why do I need it? Title insurance protects against a variety of risks, including:
Errors in public records or title documents (no good)
Claims from previous owners or their heirs (bad)
Fraud or forgery (also bad)
Undiscovered liens or mortgages on the property (my personal worst nightmare)
Does this stuff actually happen? Absolutely it does. In fact, Hywater Title recently closed a deal for a seller of property in Nashville, Tennessee. When we performed a title search, we discovered an unreleased (unpaid) mortgage from the last owner of the property! We contacted the title company that represented the parties in that transaction and learned that the mortgage was never paid off with the proceeds of the sale. Translation: This $300,000 property still had a $120,000 lien from the previous owner. With that lien, the current owner couldn’t sell the property even though it wasn’t his lien.
Thankfully our client purchased an owner's title insurance policy on the property. The insurance company stepped in and resolved the issue in a matter of days. I’m sure our new client agrees that title insurance is worth the small cost!
