Homeownership comes with the responsibility to defend that ownership, even against hidden risk. It is not your fault someone at the courthouse didn’t record a deed, or that the previous owner forgot to include an estranged daughter in the will, but you are responsible to defend your ownership against these kinds of problems.
If someone challenges your ownership of your home, that person could be right. It sounds ridiculous, but yes, someone could have a valid claim to your property. Just because a rigorous title search didn’t reveal the estranged daughter of the previous owner doesn’t mean she doesn’t have a legitimate right to claim. Title insurance doesn’t prevent that kind of thing—it pays for it. Risk to ownership is inherent with real estate ownership itself.
Furthermore, title insurance doesn’t guarantee you’ll win in court. No one can do that, not even my brother, Rusty, even though he thinks so. If you have title insurance and the estranged daughter of the previous owner challenges you in a court of law, your title insurance will pay your legal fees—it pays for your attorney and all legal-related expenses of your case. The bottom line is you might still lose your house, in which case title insurance pays your legal expenses plus the amount of money you insured the house for.
Title insurance pays valid claims and legal fees to defend your ownership. The big advantage of title insurance is that it protects you from financial loss. Nobody wants to lose all their money and their home. Title insurance keeps your shirt on even if you lose your house.
Ownership challenges are not pretty and they can be difficult to deal with, but if you have title insurance, then you keep a bad situation from becoming a worst case scenario.
I started with my family’s title insurance business when I was in high school. I was the fax machine. I delivered documents back and forth on my bicycle. I continued working for my family after I went to college and got married. We used to have an office downtown on King Street back when the courthouse was where the Casa Monica is now. Trying to get out on King Street at five o’clock was a death wish. Everyone was leaving the courthouse and it was difficult to pull into traffic. For clients with late afternoon closings, I would have to drive their car out for them into the street, leave the car in the middle of traffic (it wasn’t moving anyway) and help the client across the street to his car and on his way.
One night in late December I was having a healthy discussion with my father about internal office procedures. We were in the closing room that fronted King Street, no curtains, after dark, the lights were on, and traffic was stopped outside. I tend to be a little sure of my ideas and felt very adamant that what I was trying to convey was imperative for Collins Title to implement. After trying to get me to understand his point of view, my father finally gave up and expressed his feelings by mooning me. Needless to say, I saw where he was coming from and we ceased the discussion.
I’ve seen a lot of crazy things over the years in the real estate industry, thus I have a story for every situation—some are more light-hearted than others. Enjoy the good times, and take advantage of experience.
True or False: Is Title Insurance one of the kinds of insurances that never has to pay?
The answer is False
The job of a title insurance company is to look at the property, deal with title problems, and assess the risk. They try to minimize that risk with a thorough title search, a search of public records, looking for anyone else who might have ownership rights or interest in the property.
I have a story for every question. I’ve been in the business long enough that I can give you an example for every situation, often more than one, but I’ll limit myself to one here.
There was a lady who wanted a trust created, but she was mad at her family and wanted to give her house to the guy who had been so nice and had taken such good care of her. When she died, he got the house, and sure enough, her kids challenged his ownership. They sued him for what they felt was their rightful inheritance.
Even though the guy had gotten the house free and clear, he did not have the money to defend himself in a court of law against their claim. Fortunately he had gotten a title insurance policy on the house, and that policy paid his court cost. Completely.
Yes the title insurance company did pay out on the policy. It happens more often than you think.
Stephen CollinsTrue or False: Does Title Insurance Never Have to Pay?