Land is as old as time itself. Like the structures built on it, land is “real property,”
meaning that it can't be moved or hidden. Because real property is valuable, many people
want to claim ownership. “Titles” came about as a means of legally proving who owns
Through the centuries, however, a parcel of property may change hands dozens of times.
At any point along the chain of ownership, problems may arise that cast a “cloud” over
a title, putting a claim of ownership in doubt. Such as:
- Long lost relatives or past owners could show up, sometimes from long ago, with
a claim to the property that supersedes yours.
- Sometimes people fraudulently sell houses that don't belong to them.
For example, the husband of a divorcing couple could forge the signature of his wife,
and abscond with the proceeds of the sale.
In a court of law, the rights
of the wife could be upheld and the property could go to her, no matter how much money
unsuspecting purchaser had placed in the house.
- To get loans, people often use property as collateral
(security against nonpayment). If someone doesn't pay back their loan, the lien holding lender
has a legal right to sell off the property to get their money back-even if the house
has since sold to a new owner. This is because the lien (claim to a property as payment
on a debt) is on the house. Unless the debt is paid off and the lien released, the lien
stays with the house even when it changes ownership.
With today's booming refinance and home equity markets, lenders' interest in properties has increased exponentially
and both lenders and county recorders are challenged to keep up with the documentation.
So it's more likely than ever that an unrecorded or unreleased interest in your property
could be out there, making title insurance more important now than ever.
- An easement is a right to use the land of another for a special purpose.
For example, the city may have plans to build a sewer line sometime in the future. If
the sewer line runs through the back of your yard, and if the city has an easement on
the underground portion of your property, this might cause your prize roses to be dug
up, or prevent you from building a pool in your back yard.
- If a homeowner fails to pay his or her taxes
, the IRS can obtain a lien on the home, which gives the government a claim to that property in case of nonpayment
of debt. If the owner sells the home without settling the tax lien, the IRS can legally
get the new homeowner to pay the original homeowner's back taxes. And if the new
homeowner fails to comply, they can lose their new home.
How do you protect yourself from mistakes, fraud and other complications? Through
title insurance. It protects your claim to your property from potential problems caused
by irregularities that may have occurred in the past. Dollar for dollar, it's one of
the most cost-efficient forms of insurance for home owners. Its relatively low, one-time
premium covers you against legal problems that could cost tens of thousands of dollars-and
even the loss of your home.