This is a question we get occasionally when home buyers are starting to add up the different costs involved in buying a new home. Almost always, when they understand what it is, they buy a title policy.
What we often times call the ‘title company’ is a combination of a notary service, a private, remote, recorder of deeds, a transaction closing service, and an insurance agency (ours has snacks and refreshments too :-).
Being an insurance agency is really their business, since the other things they do are largely incidental. The insurance offered known as title insurance covers the home buyer for anything that can happen BEFORE the sale that might affect the ownership of the home after closing.
Most home buyer's would be at a loss to figure out what types of problems could exist, believing that all the paperwork they sign at closing PROVES their ownership. If only it could be so simple.
These are the top items that can cause problems for a homeowner:
1. Mechanics Liens -- any contractors not paid for work have a period of time to file a lien on the property if they aren't properly paid. One would think that the expense would follow the name of the person ordering the work, but in the law, the lien is placed on the property, regardless of who ordered the work.
2. Unresolved Wills or Heirs -- if in the past, your home was owned by a decedent, and a will was discovered after death, or an heir to the property was somehow missed in the process of transferring the home ownership, you may be in for an unexpected legal challenge. Unfortunately its not something that get's resolved with a phone call.
3. Survey Issues -- purchasing a survey when you buy doesn't guarantee that other properties or encroachments don't exist. Boundary disputes can occur.
4. Unknown Liens -- judgements, old mortgages, and other types of liens can be found, sometimes years after a sale takes place.
5. Forgeries & Errors -- Public record documents are subject to error, and even worse, forgery.
6. Undisclosed encumberances -- if someone has certain rights to your property that weren't disclosed, this can be a problem.
While most of these issues may be able to be resolved, having the time, money and 'know how' to do it yourself could be a mess. Knowing you have the backing and protection of a financially rated insurance company allows the home buyer the peace of mind and protection of knowing that once they make a purchase, their ownership will be protected.