Have you ever wondered why buyers need title insurance? The home may be new to the buyer, but every property has a history. A thorough title search can help uncover any title defects tied to the property. And, subject to the terms of the policy, the title insurance provides protection from title problems that may become known after the buyer closes the transaction. Some of these common title issues are:
 
1. Errors in public records: To err is human, but when it affects home ownership rights, those mistakes can be devastating. Clerical or filing errors could affect the deed or survey of the property and cause undue financial strain in order to resolve them.
2. Unknown liens: Prior owners of the property may not have been meticulous bookkeepers – or bill payers. And even though the former debt is not the buyer’s, banks or other financing companies can place liens on the property for unpaid debts even after the buyer closes on the sale. This is an especially worrisome issue with distressed properties.
3. Illegal deeds: While the chain of title on the property may appear perfectly sound, it’s possible that a prior deed was made by a minor, a person of unsound mind, or one who is reported single but is actuality married. These instances may affect the enforceability of prior deeds, affecting prior (and possibly present) ownership.
4. Missing heirs: When a person dies, the ownership of their home may fall to their heirs, or those named within their will. However, those heirs are sometimes missing or unknown at the time of death. Other times, family members may contest the will for their own property rights. These scenarios – which can happen long after the buyer has purchased the property – may affect the buyer’s rights to the property.
5. Forgeries: Unfortunately, we don't live in a completely honest world. Sometimes forged or fabricated documents that affect property ownership are filed within public records, obscuring the rightful ownership of the property. Once these forgeries come to light, the buyer’s rights to the home may be in jeopardy.
6. Undiscovered encumbrances: When it comes to owning a home, three can be a crowd. At the time of purchase, the buyer may not know that a third party holds a claim to all or part of the property – due to a former mortgage or lien, or non-financial claims, like restrictions or covenants limiting the use of the property.
7. Unknown easements: The buyer may own the new home and its surrounding land, but an unknown easement may prohibit the buyer from using it as they’d like, or could allow government agencies, businesses, or other parties access toall or portions of the property. While usually non-financial issues, easements can still affect the buyer’s right to enjoy the property.
8. Boundary/survey disputes: A buyer may have seen several surveys of the property prior to purchasing, however, other surveys may exist that show differing boundaries. Therefore, a neighbor or other party may be able to claim ownership to a portion of the property.
9. Undiscovered will: When a property owner dies with no apparent will or heir, the state may sell his or her assets, including the home. When a buyer purchases such a home, they assume their rights as owner. However, even years later, the deceased owner’s will may come to light and the buyer’s rights to the property may be seriously jeopardized.
10. False impersonation of previous owner: Common and similar names can make it possible to falsely “impersonate” a property owner. If a buyer purchases a home that was once sold by a false owner, the buyer can risk losing their legal claim to the property.
 
Play it Safe
These and other issues are often covered by an owner's policy of title insurance. Home buyers should make sure they are protecting their investment with title insurance.