Imagine buying a home and then discovering after you move in that the person who sold you the property didn’t own it. Impossible you say? Think again. Forged deeds are a real problem and just one of many problems you can run into as a buyer of real estate. That’s why it’s important to have owner’s title insurance.
Each state has different insurance laws, and some states require that all property buyers purchase owner’s title insurance, and other states don’t. If you live in a state that doesn’t require owner’s title insurance, and you don’t get it, you have set yourself up for a financial catastrophe.
I spent 12 years in the title insurance business and here’s an example of why you need title insurance.
I was involved in a transaction where a man and his supposed wife came in to the office to sign papers to sell their property. But as it turned out, the woman was not the man’s wife. He was actually divorced and was trying to unload the property without his ex-wife’s signature.
Now suppose you were the buyer on a transaction like this and did not get title insurance. The ex-wife would sue you, you would have to hire an attorney, you would probably lose the case, and you would have to pay the ex-wife whatever interest she had in the property. In some cases, you could lose the property.
I have seen things like this happen and the attorney fees alone can run into ten’s of thousands of dollars—or more. And forget about going after the crook who illegally sold you the property. They get their money and are long gone by the time you find out you have a title problem.
I have also seen—among other things—forged powers of attorney, easement problems, lawsuits filed by heirs to property that was sold illegally, and mortgage loans on property that buyers weren’t told about. Owner’s title insurance protects you against these problems. And unlike other types of insurance, you make a one-time payment only and the policy protects your equity in the property for as long as you or your heirs own it.
And don’t make this mistake either: Property buyers sometimes think they don’t need owner’s insurance because they’re buying the property from a relative and the relative says the property title is clear. But what happens if there is a $50,000 state income tax lien or IRS lien filed against the relative? That lien attaches to the property and if you buy it, it’s now your problem.
Title insurance costs vary from state to state. But to give you an example, a $200,000 owner’s policy in Oregon would cost you a one-time fee of around $700. That’s a small price to pay for protecting your home and having peace of mind.