How to protect your real property against hidden risks

So... you’re buying a house! Owning a home continues to be one of the most important parts of the American dream.

You want to be sure you will remain the true owner, and that there will be no claims or liens against your new home — other than the mortgage you agreed to pay.

 

Insurance that protects your lender

When you "close" on your mortgage loan, title insurance may be included in the amount you pay. Known as a loan policy, it insures the mortgage company will receive up to the full value of the policy if the company suffers a loss.

WARNING: THE loan policy does not protect you!

You can protect your interest in the property you just bought with a policy called "owner’s title insurance."

 Owner’s title insurance

An owner’s title insurance policy describes the property and defines your ownership "limitations" (if any). Limitations could be in the form of existing liens or items disclosed to you before you agreed to the purchase. In other words, limitations you have accepted in buying the house.

Owner’s title insurance protects you against what you don’t know. It takes the risk out of buying property whose legal history is long and may not be known to you in its entirety.

The "hidden risks" covered by such a policy are not common, but they do exist. If they exist in relation to your property, you could lose the property and the money you paid for it!

The mortgage company has a loan policy to protect its interest in the money it lent you.

You may want to consider protecting your own interest with owner’s insurance.

 

What owner’s insurance covers

Even though most properties have no risks when a title for real property is transferred to your name, risks are possible.

The land & buildings may have been owned by many different people over the years, and there was a chance for error each time the title was transferred. If an error did occur, but is not discovered until you buy the property, it could put your ownership in question.

With an owner’s title insurance policy, you are protected from such errors. These are called "hidden risks" .

 

Title insurance also provides the following coverage:

• Protection from financial loss due to covered claims against your title, up to the face amount of the policy

• Payment of your legal costs if the title insurance company is required to defend your title against covered claims

• Payment of successful claims against your title, up to the face amount of the policy

• Protection continues after you no longer own the property

 

"Hidden risks"

Some of the more common hidden risks covered under owner’s title insurance:

• False impersonation of the true owner

• Confusion caused by similar names

• Forged deeds and other documents

• Signatures of minors or people who are not mentally competent

• Signatures of people represented as single but who are actually married

• Errors in recording legal documents

• Clerical errors in public records

• Undisclosed or missing heirs

• Invalid documents executed under an expired power of attorney

• Fraud

• Invalid divorces

• Unpaid child support lien

• Unpaid taxes (local, state, federal)

• Unrecorded easements (rights of way)