In my 27 years in the business, I have only had one case where we almost got a title insurance company involved prior to settlement and none after settlement until a few months back and that buyer was me.
I wrote about title insurance before (Should a Buyer Have Title Insurance). In that article I covered what title insurance covers and why it is important. If you get a loan, lenders title insurance is required but owners title insurance is optional. I suggested a buyer should take the owners coverage and mentioned that I do in my purchases. I was glad I did in this case. Here are the details.
I purchased a small townhome in Newport News VA for investment purposes. It was an estate sale being sold by the heirs. The listing agent did not disclose it was an estate sale and there were problems with the contract because of that but we got them resolved and settled. (Please, please if you have had a death in the family, use an agent familiar with probate and estates. Learn more here.)
The deed was recorded in the county courthouse, proceeds disbursed to the sellers and all others including the agents. (By the way, even though I am licensed in Virginia, I opted to have a local agent represent me there as I do not know the market and I valued his input.)
A week later the title company was told that the county clerk had “pulled” the deed as they thought it was missing certain documents.
WHAT!!! Deed pulled!!! I had handed over my down payment and closing costs!!!! The proceeds had been disbursed!!!! Who owned the home then? And WHY did this happen????
Well, according to the clerk, the three heirs, who were not residents of Virginia, did not properly probate the home in Virginia or should have probated the home in Virginia or some other legal thing involving the way the transfer was handled. I didn’t care I just wanted to be sure I owned the home and this would be resolved.
My settlement company had thoroughly researched the way the heirs had taken title and specifically spoken to the title insurance company to make sure they had all of the proper documentation. The title insurance company told them to get form X, Y and Z and have all parties sign. The settlement company did exactly as instructed.
But the final arbiter is the county clerk. Why it was recorded and then pulled I will never know. And I am told by the title company the this type of deed with this type of documentation had been successfully recorded in many counties around the state but this county…well, they have a reputation for being rather particular.
So in the end, the title insurance company got involved again and made everything the way the county clerk wanted and the house in now in the books as mine.
Whew. A bit of an ordeal but I never worried because I knew the title insurance company would make me whole.
Had I not had title insurance, the possibility existed that I would have needed to get my own attorneys to straighten out the mess. The title company had done everything properly and technically were not liable to correct this. They probably would have but I never worried because of title insurance.
I never had a title issue like this before but I am glad it was me and not one of my clients. I probably would have been more stressed if it had been a client.
Again, always get title insurance. You never know.
