Key Takeaways
- Title defects discovered after closing — undisclosed heirs, forged prior deeds, recording errors — can cloud your ownership even if you bought in good faith.
- Owner’s title insurance is the primary protection against post-closing ownership challenges; it covers legal defense costs and any judgment.
- Unpaid HOA dues, mechanic’s liens, and IRS liens can attach to a property and survive the sale to the new owner if not caught during the title search.
- Wire fraud at closing can result in a buyer losing their down payment with no direct legal recourse against the title company if they followed fraudulent instructions.
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
- Undisclosed Party Walls – If you buy a row home, easements exist even if the wall is gone. This clouds titles and causes delays, even after a home is bought.
- Liens – Even if the home is new, if a previous owner owed a debt from the 1920’s stock crash or 90’s “.com bubble burst”, a lien can be filed on the property and you can lose it.
- Forged Names on Deeds – All it takes is one forged name or misrepresentation of a name in the past, even from an immigrant with no papers that bought a home in the 1800’s, and previous owners can make a claim on your home.
- Typos – Whether it was hand written or someone was working late, a typo on previous transaction and deed records can cost you 1,000’s of dollars to fight and possibly the rights to your own home; even if the typo was from 20 or more years ago.
- Affairs – If a previous owner had an affair and a child resulted from it, that child’s family can make a claim and possibly take your home, even if it was 3 generations back.
- Squatters – If you bought an abandoned home, even if it is to flip and rent or sell, squatters can prevent you from taking ownership. A squatter living in the property you just bought can file a “quiet title” through “adverse possession” and the home you just bought is legally theirs.
- A Will is Discovered – If the land or the home you just purchased is old and has had numerous owners, make sure all wills are accounted for. If not, an heir from a previous will could come back and make a claim.
How can you protect yourself from losing your home?
It’s easy. When you’re at your closing appointment you’ll be offered title insurance policies. It could be owner’s and/or homeowner’s. This is what protects you from losing your money and covers the costs while you fight to claim the rights and deed for the home you just purchased. It’s a one time fee and you cannot buy a policy after the documents are signed, so it is up to you to choose if you want protection in case something like above goes wrong.