It Could Never Happen to Me.

Image by Getty Images via Daylife

Friday, February 13, 2009

Title Insurance: It could never happen to me?

Most people don't even know what Title Insurance is and those that do usually think that itis a boring topic, on the scale watching grass grow.

But there are some interesting stories attached to Title Insurance.

One of my friends inherited a lot a few years ago and she gave it to her son to build a house. They went through all the correct legal procedures and after the beautiful new home was completed her son closed on his new loan at the attorneys office, just like he should, and moved in to his new home with his family.

Fast forward two years. One day her son is served with court papers. The person who owned the home behind them had put an easement on the property for a 50 foot road that was recorded at the court house but had mistakenly not been recorded at the RMC office. When the title search was done on the property the easement was missed. The story behind the easement in the first place is another interesting one and the subject for a later blog.

It is a mystery as to what the person that has the easement on the property actually wants. A corner of the home is over the easement and so in order to make use of it the house would need to be torn down. The neighbor does not actually have a need for using it but he has the court papers to prove that a judge gave him the right to it. So now what?

Well, my friend's son would have saved himself a lot of stress and trouble if he had just purchased an Owner's Policy when he purchased the Title Insurance for the mortgage company. The mortgage company's policy was mandatory when he closed on the loan but the Owner's Policy was not and his closing attorney didn't even mention it to him. It would have cost $75 at closing and it covers it forever.

Now if the issue is forced to destroying the house, the title insurance will pay the mortgage company for the amount left on the loan but the all the extra money he has put into the house is gone and the he is left with an almost worthless lot.

I think that the neighbor has an attorney who thinks that they can get them to pay them off to drop the issue because they have backed them into a corner.

To say the least, the whole thing is a mess and all could have been prevented for a $75 Owner's Policy.

Posted by Liza Valero