Many homebuyers are encouraged to get title insurance when they buy their first homes. Title insurance basically protects a homeowner in the event that the title on his or her home isn't exactly as clear-cut as believed to be. If a property is sold by someone who doesn't technically own it free and clear, any back payments or judgments are transferred to the new owner. Title insurance protects the homeowner from being burned by common title mistakes.
Title mistakes happen more often than one would think. Unfortunately, they leave the new title holder to bear the brunt of the blow. This can mean serious financial impacts, and in some cases, losing your home. Some of the most common title mistakes are outlined here.
A Filing Error That Disrupts Ownership
Even simple errors on a public record can carry severe consequences. Clerical mistakes, for example, can lead to discrepancies on a deed or property survey. This can be anything from back taxes that were improperly filed to forgetting to add a person in the chain of ownership. Errors that affect homeownership can be complex and costly to resolve.
A Hidden Lien You End Up Paying
If a homeowner doesn't pay his or her taxes or mortgage, either the bank or the government will put a lien on the home. Unfortunately, this judgment transfers. If a seller doesn't know there’s a lien on his or her home or deliberately hides it, you could end up having to foot the bill. It doesn't matter it's not technically your debt; the bank or government can still put a lien on your property. Obviously, this is another costly mistake.
The Secret Heir Steps Forward
The concept of a missing heir sounds like something out of a bad soap opera, but it happens often. It occurs when a person dies and leaves his or her home to an heir. The estate manager will try to contact the heir, but sometimes, the individual is either unknown or missing. The house is sold, and years later the heir steps forward to try and claim the property. In other cases, family members may try to acquire the property for themselves if the heir isn’t found. Either way, your property rights are in jeopardy.
The Encumbrance That Time Forgot
Unknown encumbrances happen quite frequently. Encumbrances give a third party some sort of claim to your property, whether it has to do with property usage or financial considerations. Sometimes, it can be an old, hidden mortgage that was lost to time. It could also be a covenant, which restricts your property from being used in a certain way. Either way, any kind of encumbrance is likely to be costly and frustrating.
The Annoying Easement No One Knew About
Hidden easements are another common title mistake. An easement is when someone has a right to use your property, even when he or she isn’t the owner. This occurs often in resource-rich areas – as is the case with many oil companies that have rights to private properties for drilling. There’s a whole host of reasons there might be an easement on your property. Though it usually isn't a mistake that leads to financial consequences, it’s a bit of an inconvenience.
A Survey Discrepancy Leads to a Border War
The dreaded boundary dispute is similar to an easement. Occasionally, someone makes a mistake when surveying a particular property. This mistake can carry on through the years, and new home buyers may be surprised to find out the big yard they have isn't so big after all. Regardless of how it occurs, boundary disputes can lead to claims on a portion of your property, which isn't exactly conducive to neighborly love.
A Weak Link in the Ownership Chain
Occasionally, there might be a break in a property's chain of ownership. The property records will often appear legitimate at first glance, but further investigations find there was an illegal deed at one point. This happens when a previous owner was an illegal immigrant, someone who signed the deed fraudulently, someone who wasn't of sound mind, or something similar. Regardless of the reason, an illegal deed in the past can come back to haunt present owners.
An Illegal Forgery Signed in Secrecy
Again sounding like something out of a soap opera or a western, forged documents can and do appear. Sometimes, these slip through the cracks and into the public record system. A forged property record can greatly affect property rights, and may even mean your home can be taken away. False impersonation is a similar issue. Once in a while, the person selling the home doesn't actually have the rights to do so. If you buy a home from someone impersonating the true owner, you could end up paying a lot of money for a house that isn’t technically yours.