Many of my buyers have asked me over the years whether or not title insurance is necessary. The buyer’s attorney recommends it to the buyer and the buyer questions it’s value because the property has passed the title exam. I highly recommend title insurance to all my clients.
The reality is that a title examiner performs a title exam, not an attorney – mistakes happen every day. Registry records are incredibly disorganized. And more importantly, titles and title issues are incredibly complex, and the smallest thing, like the word “and” can totally change the validity of a document.
Attorney David Hallett gave a great example, “One statistic to consider – of the people who recently purchased properties at foreclosure in the last 5 years, something like 10,000 or more of them are now involved with their owner’s title insurance companies due to errors in the foreclosure documents that no attorney, title examiner or title company noticed or found. If those individuals did NOT have title insurance to resolve the issues, they would be out in the aggregate tens of millions of dollars.”
The most common actions to cure title defects include:
• Releases/pay-offs for liens
• Releases/pay-offs for deeds/mortgages
• Typographical corrections (names, addresses, legal descriptions)
• Clearing estate/family issue
• Clearing physical property issues
What if a problem is hidden or missed?
After all this searching and examination, a title problem may still be hidden or missed, such as:
• A forged signature on a deed
• An unknown heir who steps forward to claim ownership of the property
• An expired or forged power of attorney used during a property transfer
• An incorrect public record
In each of these cases and many more, when there is appropriate title insurance coverage, a policy will offer financial protection. The title insurer defends the title and either perfects the title or pays valid claims.