How do title claims arise?
There are different types of title claims. Here’s a look at the most common issues you might face.
One of the most common types of title claims is mortgage lien. Previous homeowners may not have paid their property taxes, mortgage, or HOA fees. Easements can also lead to title claims. If your property has an easement, it means that while you own the land and your home, another entity has the right to access your property. For example, your local utility provider may be allowed to enter your property to access a utility pole. Your neighbor may be allowed to access your driveway to get to their property. If your title company missed easements filed on your property while searching for title, you might be surprised that someone else, or a utility, has the right to access your property.
Title theft and title fraud can also result in a claim against your title. Title theft is a serious problem: it 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 look like he owns your home.
Once the thieves create their fake titles, they can apply for a cash refinance on your home. They will then take the money from that refinancing and disappear. Other times, they’ll take out a home equity line of credit – better known as HELOC – in your name. They will use the equity in your home to make large purchases without making any payments on that HELOC.
Either way, you could face foreclosure when these loans are not repaid. Fortunately, title insurance will protect you in the event of title fraud.
Title Search Neglect
When you take out your mortgage, your title insurance company will perform a title search – which you are paying – to find any claims or liens on the home you are buying. This research is supposed to protect you from future title claims.
Sometimes, however, title insurance companies may miss a claim or lien during their research. Again, your landlord’s title insurance policy should protect you against any future claims arising from botched title searches. You may want to consult with a real estate lawyer to make sure you don’t have to pay fees or lose your home because of a mistake made by your title insurance company.