There’s no doubting it – title insurance rates are confusing. They’re baffling because most people immediately compare it to car or health insurance. But title insurance (both owner’s and lender’s) are nothing like a traditional insurance package that fluctuates in price, cost and coverage. That is where the confusion sets in.

If you’re asking yourself “Do title insurance rates increase over the time of a mortgage?“

The answer is no. Title insurance is paid in full with your closing costs if you choose to buy it.  The policy remains yours until you transfer the title or sell the property. Although it’s a one-time cost, the value of the title insurance does increase as property value increases, so it’s like an added win for you.  The longer you have the policy, the more it covers you for, and you never pay another penny on the policy.

Important thing to note: Only enhanced title insurance value increases with the increased value of the home up to 20% on average.

It is also important to know that there are two major types: owner’s and lender’s policies. The owner’s policy is issued for the purchase price of the property and contains all the basic coverages. The lender’s policy covers the amount of the loan.  But these are different than automobile or health insurance.

Auto, health and even care insurance policies are typically paid in monthly installments as you use or own the item that is insured.  The item can go up and down in value or become higher or lower risk.  That is the reason why they fluctuate and change.  Title insurance is a one time fee which is why it looks expensive when you see the price at your closing appointment, but title insurance rates do not change because you have already paid in full.

Title insurance is an added expense when purchasing real estate, and it’s an absolute must. Why? It protects you from any loss  (claims or legal fees) that arise from issues connected to the title to your property, such as:

• Unpaid real-estate taxes
• Unpaid mortgages
• Other liens against the property that are unresolved, including foreclosure that give creditors the right to foreclose on the property
• A forged signature in the past to transfer title from one property owner to another
• Transferor did not own the property to begin with
• Gaps in prior title ownership like a deceased owner whose estate has not been finalized and may have heirs with legal rights to the property.

You may now be asking yourself “What if my property value goes up?“ or “Does the title insurance policy still cover it, or does my rate increase?“.

This is worth reiterating because it’s another frequently asked questions. The answer is no, your rate will not go up. You pay a one-time fee for your title insurance at closing, and regardless of how much value your property gains, the title insurance policy will remain the same. The insurance coverage on “Enhanced Policy” goes up with inflation up to 20% in most states. But the premium paid at closing doesn’t change.

You find a house, make an offer, get to closing and pop the champagne. Next week you find out the house is no longer yours.  This happens more than you think.  Below you’ll find 7 examples of how this could happen and the best way to protect yourself from losing your home.

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Examples of How You Can Lose Your New Home After Closing

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No, but it is a wise idea.  When you pay cash for a home, you may think it’s permanently yours and no one can take it. However, if there’s a problem with the title it can threaten your ownership rights. That’s why banks normally require a lender’s policy when you take out a mortgage to pay. When it’s just you and you’re using cash, you’re the one taking on the liability and that is why having an owner’s policy is a smart idea.  But what is the likelihood something could happen?  Here’s some examples.

If a past owner used a fictitious name or forged a notarization on a document during a previous closing, it can break the chain of title and affect all of the transactions that happen afterward.  Your title company will do their best to detect forgeries while researching records and the property’s history, but there is also room for error, especially when someone lied about who they were or a name was signed incorrectly in the early or mid 1900’s.  There is a lot of room for error.  You also have liens.

If a person claims and can prove that a previous owner owed them money or a debt, you may end up losing your home, or the land it is on.  This doesn’t have to be recent, it could be 5 years ago or even dating back decades.  Was the home built or owned by someone pre-stock market crash in the 20’s?  What about the .com bubble burst?  Either of these could have caused the previous owner to have a debt that could come back to haunt you.  That is something your title company may not be able to find. A third example which should hit close to home for many of us are clerical errors.

Have you ever called to have something refilled at a pharmacy and the person was swamped and mistyped your name and couldn’t find you?  Maybe you needed a record looked up and the person couldn’t hear exactly what you said and asked you to repeat yourself two or three times.  It could even be that someone misspelled your last name, and it now becomes a hassle for you to get it changed even though it was that company’s employee that made the mistake?  The same thing that happens then could cost you your home.

You are probably not the first person to own the property, and with it transferring ownership multiple times and numerous employees re-entering transactional data, there’s a good chance there could be clerical errors.  These errors whether they’re filing or getting the name wrong because the person was working late one night are costly.  And because you paid cash, they are your financial burden to fix.

Even if you paid cash for your home, it can be taken away like in the examples above.  Defending it can be incredibly costly with legal fees and that is why it is recommended you buy a title insurance policy, especially in cash deals.

If you’re buying a home with a mortgage or you’re refinancing your loan, you’re likely going to need information or documents from the federal government. But what happens when workers are furloughed during a shutdown?

If it lasts for more than a few days, it can affect the home buying process and delay your closing.  Not only does this cost you time and stress, but possibly money too you have contingencies in your purchase agreement. The good news is that you don’t have to let the shutdown affect your home buying process. Below are some ways a furlough can affect your mortgage approval and what you can do to work around some of the more common problems so that your home closing can be fast and less stressful.

HUD Is Short-Staffed

HUD manages the FHA and VA loan-backing program for private mortgages, and while the loans are still being written and approved by private mortgage lenders, the support staff won’t be helping with underwriting and answering questions. As a shutdown continues, the backlog of mortgage applications grows meaning that even when things go back to normal, your application could still take a lot longer than usual. Additionally, [Read more…]

Closings on estate sales can be complicated even when everything is in order and the process goes smoothly, but they get really tricky if there are any issues with the title. Good real estate agents know what problems might arise during an estate sale and work with the probate attorney, executor, and escrow officer to avoid potential title exceptions before they cause trouble and delay a closing.

Why Do Title Claims Occur on Estate Sale Closings

Most estate sale title claims come up when a homeowner listed on the legal title dies intestate, which means they didn’t have a will. Without a will, their possessions must be divided up by a probate judge who will hear the facts in court, then make a decision on how to distribute the assets to the heirs. The process can be unpredictable until it’s finalized and a home cannot be sold until the entire process is complete, a personal representative or executor is named, and letters testamentary have been issued.

All of this can take months to clear up, and no transfer of title can happen until the process is complete.  If you were buying the property as a flip or investment, this can kill your deal and cause issues with your lender.  That’s why it’s imperative for agents who list and buy estate sales, especially at auction, to know what could go wrong and how to head it off at the pass before the property goes under contract and closing dates are set.

Here’s a quick guide to common estate sale title issues so you’ll know what to watch out for and how to be proactive to prevent clouded titles so the escrow company can close on time.

Contested Wills and Contentious Family Members

A death in the family is tragic and stressful for all involved, and often brings out the worst in people. When the last will and testament is read, it’s sometimes a big surprise to children, siblings, and spouses who thought they were going to get the house, to only find out that they’ve been disinherited. Not only can spouses and children contest a will, so can anyone who has ever been named in previous wills. Contesting a will is a lengthy, expensive process and, until the probate court makes a decision on the validity, no assets, including the title to a home, can be transferred.

Wills can be contested months or years after death, or even longer if there’s alleged fraud involved. However, if title is held as joint tenants with the right of survivorship, the property shouldn’t be subject to probate the way the other assets might be.  Therefore, living spouses who were jointly listed on the title will probably be able to sell the house even if the will is contested in court. Working with people you know who have obtained deeds properly without adjudication, can help you avoid the nastiness of contested will and heated arguments among the seller’s family over who owns what.

Secret Marriages That Reveal A Different Legal Spouse

Secret marriages aren’t just a made-up plot in romance novels. Many people marry badly or under less than ideal circumstances that they find embarrassing, and sometimes that lead them to abandon their first spouse to start over with a new love. This not only causes personal problems, but it can also change who might legally inherit a property.

Most people in bad marriages seek a divorce to end the marriage before remarrying. Even if they stay single, divorce is the legal means to dissolve the marriage contract. If someone has a legal marriage license but never got divorced, their original spouse is still their legal spouse, which means that a remarriage is void under the law. Legal spouses and children are usually the first in line for any inheritance when heirs are determined by a probate judge. A botched divorce could mean a first spouse gets everything.

Sometimes people think they are divorced when they actually haven’t finished the process to make it legally binding. Maybe a document wasn’t filed correctly or maybe they had a marriage annulled by religious authorities and they thought that was good enough to cancel the legal marriage contract too. It’s even possible that someone doesn’t remember getting married, especially if they have medical issues like amnesia or even substance abuse problems.

However, if a previous marriage that was never ended is discovered during probate, the surviving spouse might end up not being a legal spouse at all which means they may not actually be the heir to the property.  Consequently, someone completely unknown could end up with their interest in the house. Regardless of circumstance, all of the details will have to be sorted out in court and beneficiaries named before a home can be listed.

Finding previous marriages is easy enough that an agent can do a quick search without too much effort. It’s fairly straightforward, because marriage and divorce records are public information kept by government officials. You’ll need to know any maiden names if applicable, and then you can do a preliminary search to discover if an unknown spouse might cause a problem. Try these tips for finding marriage records:

• Ask the surviving spouse for any legal documents, including divorce records, that affect anyone listed on the title. If you’re worried this sensitive subject might cause awkwardness in your relationship with the widow or widower, have the probate attorney ask.
• Google the deceased owner’s name with keywords like “marriage” and “divorce”. Many times, marriages are published in newspapers, church bulletins, or other records, which will come up in an internet search.
• If you know where they’ve lived in the past, try looking up public records in state, county, or city where they’ve resided. The CDC has a list of where to look for marriage and divorce records sorted by location.
• Check family tree and genealogy websites to see if the homeowner is listed in multiple family trees or connected to families that don’t fit with what you know. This can give you names, dates, and locations to use in your other searches.

Illegitimate Children Impeding the Sale

When the court determines who the rightful heirs to an estate are, spouses and children generally take precedence over other possible heirs. That includes all of the children, even if they were conceived out of wedlock and even if no one else knows about them.

A love child could inherit a portion of the property and might not agree with the other parties about whether it should be sold. Widows might refuse to work with children fathered by their husband with another woman, especially if infidelity was involved. It all adds up to a family feud that will cause headaches for everyone involved in the closing.

Another issue could be back child support. If a child is owed support and the non-custodial parent has a judgment or garnishment, the arrears could be taken out of the estate which can complicate a listing and force a court confirmation sale, which causes even more legal red tape.

Preventing issues with children born outside of the marriage isn’t easy. Birth records aren’t usually made public, and birth announcements for illegitimate children just weren’t done in the past so a newspaper search probably won’t turn up any results. You can check for any child support actions or paternity suits with the court, which might give you a lead. Family tree software might also give you clues to the existence of additional children.

Tax Liens Encumbering an Estate

Unpaid taxes can cause a tax lien on a home, which can be placed by the IRS or any other taxing authority. Liens must be paid in order to get a clear title and sell the house. Tax problems on estate sales are more common than you might think. Lengthy nursing home stays, financial difficulties if the homeowner has health problems and is unable to work, or even early stages of dementia can mean tax bills go ignored.

Keep a tax lien from killing the sale with a simple search. Experienced agents should be able to quickly identify all of the entities where property taxes should be paid, and most tax records are accessible online. Court records for judgments and liens for the deceased are also easily found, although you might have to take a trip to the courthouse where the property is located. Finding out about tax liens early in the process gives the personal representative of the estate or surviving spouse enough time to pay the back taxes and clear the title before you list the home for sale.

Discovery of a Hidden Will

If a homeowner dies without a will, the probate court may sell off real estate holdings in order to liquidate all of the assets and distribute them to heirs that have been identified. Even if the current homeowners are alive, if any of the past owners died while they owned the home, sellers could be blindsided by the discovery of a hidden will that name unknown heirs to the estate, clouding the title until a court rules on the matter.

There’s no way to be absolutely sure that there are no secret wills tucked in a file cabinet or a drawer but obtaining a full ownership history can help you determine if a problem could exist, and if more research needs to be done. Look to see if the property has been part of the probate process, which means there wasn’t a legal and binding will found during the proceedings. This should give you names and leads for further investigation. Current family members might also know some information that might help. Is there a family story about a missing will or secret documents that have never been found? If so, take a closer look at all of the paperwork and make sure you have a good title policy in place and a reputable title company to protect the new owners after purchase.

Married Couples Who Have Broken Joint Tenancy and Are Tenants-In-Common

This problem could arise if both spouses are named on the deed but one has placed his or her interest in the property into a trust, which severs joint tenancy. This makes the owners tenants-in-common, which means that upon death, the surviving spouse won’t automatically inherit the property, and a judge will decide who the rightful heirs are based on the will or state laws. Joint tenancy for married couples means that they both have an interest in the property and survivorship rights so if one spouse dies the other inherits their share of ownership without having to go through probate.

Sometimes well-meaning homeowners are trying to protect their spouse but don’t seek out qualified estate planning advice, creating a trust structured in a way that accidentally affects joint tenancy. Even if the deceased spouse meant for the widow or widower to inherit the home, if the title is in a trust it will have to go through probate court which can take weeks or months to clear the title before the home can be sold.

Real estate agents can get a heads up on this problem by getting a complete history of all of the documents, wills, and contracts that have to do with the title. If you are planning to list a home from a widowed seller, ask them specifically about if there were any trusts created involving the property’s title.

Estate sales can be great listings, especially with experienced agents with the knowledge to prevent clouded titles. By having open communication with the sellers, gathering as much documentation as you can, and knowing how to find records, you can nip problems in the bud and get that estate home sold.

One crisp autumn morning, Jack and Kate went to pick up their moving van to begin packing their belongings and move into their first home. They had just gotten married the week before and closed on the house of their dreams. The closing went quick and smooth and all they could focus on were the memories they were going to make in their first home together. The halls would echo with their future children’s laughter and the kitchen would host their first Thanksgiving. Then Jack’s phone rang. It was the title company calling to tell them they had an issue pop up post-closing that involved a $5000 lien on a prior owner.  Jack and Kate’s immediate dreams came to a complete halt.

Situations like this happen all the time, whether it is pre-closing or post-closing. The best way to counteract pop up surprise issues like this is to proactively cover yourself and your family. Buying a home is one of the biggest investments you will take part of in your lifetime. Why wouldn’t you take all precautions in protecting your investment? Most people think that owner’s title insurance is not necessary on their home because it is a new build or just land. Think again. Owner’s Title Insurance does not just protect your home, it protects the property and the land the home is on as well. Home Warranties protect appliances, Homeowner’s Insurance protects the house, and Owner’s Title Insurance protects the property entirely. Protect what is yours.

Though Owner’s Title Insurance is optional, the practical thing to do is to purchase it when you buy your home. It is a one time fee that covers you throughout your entire ownership. For an investment that large that may be the home you own forever, do what makes the most sense. Some individuals may come forward and proclaim that title insurance is a rip-off because land records can be researched online, but what they don’t realize is that a lot of documents may be miscoded, have the wrong legal description, possible forgery, grammar issues, a lack of releases on prior mortgages, and the list goes on. Sure a title search on the property records can pull this, but how do you cover yourself on the issues that may arise? What if a document isn’t even recorded yet from the prior title company when you sell or buy your home? What if the neighbors built a deck that encroaches on your property – who will help you?

Jack and Kate remembered that their helpful realtor had advised them to buy owner’s title insurance at closing. They quickly called their underwriter to obtain their policy and submit a claim and the title insurance policy covered them against the prior lien of $5000. So instead of having to pay the $5000 lien on the prior owner and any attorney costs associated with the lien , they were able to submit a claim and get covered immediately through their policy. Jack and Kate then picked up where their dreams left off and he picked Kate up and walked her through the doors of their first home.

Title insurance will cover you and those pesky attorney costs affiliated with any legal issues that may arise on your property. Imagine having to cover an immense financial loss all because you opted out of purchasing a title insurance policy at closing. With coverage, your property is secure from any undisclosed defects that could potentially harm your future plans. Next time you go to buy or sell a property, double check if you are purchasing owner’s title insurance so your policy can come to your defense in a time of need. You may not be able to protect yourself from the “what is” but you can definitely protect yourself from the “what ifs.”