{"id":6869,"date":"2025-10-02T09:29:52","date_gmt":"2025-10-02T13:29:52","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6869"},"modified":"2025-10-19T17:22:11","modified_gmt":"2025-10-19T21:22:11","slug":"home-buyer-turns-down-an-owners-title-policy-what-could-go-wrong","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/home-buyer-turns-down-an-owners-title-policy-what-could-go-wrong\/","title":{"rendered":"Home Buyer Turns Down an Owner\u2019s Title Policy. What Could Go Wrong?"},"content":{"rendered":"\n
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Your deed is a valuable document. But does your deed assure you that you hold the title free and clear of a past owner\u2019s obligations?<\/p>\n\n\n\n

A title search looks at court documents, bankruptcies, deaths and divorces, and unpaid secured debts. Any title problems should surface during the title search if you\u2019re getting a mortgage. Once problems are found, they should be resolved before you close and receive the keys.<\/p>\n\n\n\n

But now and then, something gets missed. And missed details can surface days, weeks, months, or years after closing.<\/p>\n\n\n\n

So let\u2019s talk about the value of an owner\u2019s title insurance policy<\/em>.<\/p>\n\n\n\n\n\n\n\n

True Story: Betty\u2019s Unpleasant Surprise<\/h2>\n\n\n\n

Here\u2019s a real story from the American Land Title Association (ALTA) about Betty, who purchased a home, financing half of its value.<\/p>\n\n\n\n

Betty had to pay for a lender\u2019s title insurance policy<\/em>, to cover the bank\u2019s interest in the good title of the lender\u2019s collateral \u2014 Betty\u2019s new home. Paying for the lender\u2019s title coverage is a standard part of a mortgage borrower\u2019s closing costs.<\/p>\n\n\n\n

When the question came up, Betty declined to buy an optional owner\u2019s policy<\/em>.<\/p>\n\n\n\n

This proud new home owner soon found out that a court recorded a $20,000 lien on the seller\u2019s title just before she closed and recorded her new deed. Her seller, who owed the money, was nowhere to be found. Betty was forced to pay $20,000 to avert foreclosure.<\/p>\n\n\n\n

This didn\u2019t have to happen. Betty could have bought an owner\u2019s title policy, just in case a party had filed a lien that didn\u2019t show up in the search. Then the title policy would protect Betty in case of legal action to resolve the lien. Betty could have even ordered an add-on to cover the gap from the title search to the formal deed transfer.<\/p>\n\n\n\n

But Betty\u2019s case was a rare fluke, right?<\/p>\n\n\n\n

Not exactly. Last year, says ALTA, title insurers spent $673 million in payouts on behalf of shocked deed holders like Betty. In other words, some buyers do wind up using their title insurance policies.<\/p>\n\n\n\n

When a seller gives you a <\/strong><\/em>warranty deed<\/em><\/strong><\/a>, that\u2019s an assurance you\u2019re getting a marketable title. Ask the title company that issued the warranty for assistance resolving title disputes.<\/strong><\/em><\/p>\n\n\n\n

Title Insurance Is a Hedge Against Unpleasant Surprises<\/h2>\n\n\n\n
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Your lender isn\u2019t taking chances. Lenders hold title policies (which buyers pay for) as shields from risk.<\/p>\n\n\n\n

As the home buyer pays the loan down, the lender\u2019s risk diminishes. And the coverage shrinks. A paid-off mortgage has no lender\u2019s coverage left at all.  <\/p>\n\n\n\n

In contrast, a policy that names the home buyer <\/em>as its beneficiary is good throughout ownership.<\/p>\n\n\n\n

This owner\u2019s title policy<\/em> will be there for the homeowner if it turns out that the title company missed something when it ran the title search. The policy covers a deed holder in case of:<\/p>\n\n\n\n