Unexpected Real Estate Title Defects: How to File a Claim With the Insurance Company

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Much is said on the role of title insurance in protecting protect the buyer from unknown liens, easement holders, or a prior owners’ heirs who claim an interest in the buyer’s new home. 

Title insurance covers the policy holder against loss related to these various defects in title. Other examples of title defects include undisclosed restrictive covenants on the property, documents recorded with mistakes, and fraudulent or otherwise invalid transactions in the chain of title. A good title insurance policy protects the policy holder against property devaluation stemming from such problems if they arose during a previous ownership, unbeknownst to the buyer. The role of the title insurer is to defend the policy holder against legal challenges to the title, and to pay the policy holder for covered losses in value.

So far, so good.

But what happens if there is a title defect, and the owner actually has to use the title insurance? 

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New Risks for Property Owners: Economic and Physical Effects of Climate Change

Image of a house with ocean waves splashing under it meant to represent rising sea levels caused by climate changing. Photo by Clint Patterson via Unsplash

This story, alas, is unfolding. Physical signs of a heating world and its shifting weather patterns appear in tropical storms and in sea level rise, in heat waves, droughts, and wildfires. The economic and physical impacts of climate change are making their mark on real estate

Affected cities have already paid heavy costs in repairs and reconstruction, insurance premiums, and loss of trade and tourism. Real estate markets are seeing severe weather events steadily chip away at property values. Public initiatives to mitigate risks will increase taxes, code compliance burdens, and financing costs.

In other words, the risks go well beyond destructive incidents from specific disasters. They include higher capital and maintenance costs related to fire, water, and weather damage on properties over time. To anticipate the risk of climate-related damage, analysts are mapping properties—feeding site-specific data into geophysical, hydrological, and economic models. 

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Property Title? Deed? What’s the Difference?

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When you buy a home, you receive the deed. And you hold title. The deed and title are interrelated yet distinct concepts.

Title refers to ownership, including the legal right to possess and use a parcel, the right to exclude others from using it, and the right to transfer your interest to others.

If you do transfer your property to another person, the deed is the vehicle that moves your legal interest in the property to the other party.

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How to Prove Ownership of Real Estate

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You own real estate. If you’re asked, how do you show proof of your ownership?

Essentially, the proof is in your property’s title history. This means: 

  • Your ownership interest is only as good as the interest conveyed to you by the last owner; and
  • Others could have dibs on your property, if you used it to borrow money.

Of course, when you bought your home, the title company researched the chain of title to ensure previous owner had the right to convey to property to you. How do you check the chain of title now? The county keeps records. Many county websites make the information accessible online, so you can look up mortgages, other liens, and deeds that pertain to your property.

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Should You Remove a Deceased Owner from a Real Estate Title?

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When someone who owns real property dies, the property goes into probate or it automatically passes, by operation of law, to surviving co-owners. Often, surviving co-owners do nothing with the title for as long as they own the property. Yet the best practice is to remove the deceased owner’s name from the title.

Here, we review some common scenarios, and reasons to update a home’s title after an owner’s death.

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Deed Restrictions: How They Impact Homeowners and Communities

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Your home is your castle. But language in your deed just might keep you from installing a pool, constructing a basement apartment and renting it out, or using a non-neutral shade of paint on your exterior walls. Here is a brief explanation of deed restrictions and how they impact individual homeowners — and entire communities.

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You Have One Job: The Narrow Duty of a Trustee Under a Deed of Trust

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In states using deeds of trust, a trustee is a third party who holds legal title to a property until the homebuyer or commercial developer pays off a loan associated with the parcel—or until the borrower defaults.

When a state’s law allows for deeds of trust as instruments to hold legal title to a property:

  • A lender financing the sale or development can easily exercise the right to foreclose.
  • Foreclosure occurs not through the court, but under the power of sale clause in the deed of trust. (This allowance for non-judicial foreclosure differentiates deeds of trusts from mortgages and some land contracts.)

The main thrust is to lower risk for lenders. Perhaps it’s no wonder that deed of trust states rarely go to bat for a borrower fighting foreclosure.

In this analysis, we’ll look at the trustee’s narrow liability under the deed of trust (not to be confused with a living trust, in which a trustee must comport with exacting fiduciary duties.

We’ll also review a recent case in point, involving a commercial borrower in California.

Finally, we’ll look at the exception that proves the rule: North Carolina.

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How a Lien Affects the Real Estate Title

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Many people have liens on their real estate. Consider your mortgage—a lien that leverages the home as collateral for your mortgage loan. Other liens, too, can show up in a title search. Homeowners should know what kind of liens might attach to a home they already own, or a home they’d like to buy. Here, we review the basics of home liens: types of liens, how they impact the home’s title, how they can lead to foreclosure, and how to remove them.

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