How Do Claims Against Title Arise?
There are different types of title claims. Here’s a look at some of the more common ones you might face.
Mortgage Liens
One of the more common types of title claims is a mortgage lien. Previous owners might not have paid their property taxes, mortgage loan or HOA fees. Easements might result in title claims, too. If your property has an easement on it, this means that while you own the land and your home, another entity has the right to access your property. For instance, your local utility provider might be allowed to enter your property to access an electrical pole. Your neighbor might be allowed to access your driveway to get to his or her property. If your title company missed any easements filed on your property during its title search, you might be surprised that someone else, or a public utility, has the right to access your property.
Title Malfeasance
Title theft and title fraud can also result in a claim against your title. Title theft is a serious problem: This happens when a criminal uses your personal information – such as your Social Security number – to steal your identity. This thief then creates a fake title deed, making it appear that he or she owns your home.
Once thieves have created their fake titles, they can apply for a cash-out refinance on your home. They’ll then take the cash from that refinance and disappear. Other times, they’ll take out a home equity line of credit – better known as a HELOC – in your name. They’ll use the equity from your home to run up big purchases without making any of the payments on this HELOC.
In both cases, you might face foreclosure when these loans go unpaid. Fortunately, title insurance will protect you in case of title fraud.
Title Search Negligence
When you take out your mortgage loan, your title insurance company will run a title search – that you pay for – to hunt for any claims or liens against the home you are buying. This search is supposed to protect you from future title claims.
Sometimes, though, title insurance companies might miss a claim or lien during their searches. Again, your owner’s title insurance policy should protect you from any future claims arising from sloppy title searches. You might want to consult with a real estate attorney to make sure that you don’t have to pay any fees or lose your home because of a mistake made by your title insurance company.