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Owners Title Insurance in Massachusetts
How Purchasing this Policy Protects your Investment. Buying a home is usually the single largest investment that anyone makes and an Owners Title Insurance policy protects you against a total or partial loss of your home, for as long as you live there, for a one-time rather small fee. Before you understand Owners Title Insurance, you need to understand what a title is.
Basically, a title is a term that includes all of the seller's legal rights to own, use and sell a piece of land. The title reflects all previous ownerships and transfers, including rights previously granted by other parties (such as mortgages and easements). If there are problems with the title, the ownership of your land could be in question and you can lose your home even after the Closing.
Unpaid taxes, a lien (which is an unpaid claim) filed by someone who worked on the house, or any of countless other situations that could cause a major problem (see "Examples" below). And even if a new purchaser were to lose the land over a title defect, he or she might still be responsible for the mortgage! That’s why it’s important to have title insurance.
Below, please find answers to some frequently asked questions:
What is an Owners Title Insurance Policy
It’s insurance against undisclosed problems with the title, and it protects you against financial losses due to title defects, liens or other matters which are not of public record. Title insurance will defend you against a lawsuit attacking your title, or reimburse you for the actual money lost. Before a policy is issued, which is done through the attorney closing the loan (who like any insurance agent receives a commission from the insurance company), a title exam will be done and reviewed by the closing attorney to detect, prevent, and eliminate risks and losses caused by title problems. This is done by searching public records to develop and document the chain of title to the property and by identifying all outstanding claims. If we are closing your loan for you, then these matters will be handled by us. If you decide to buy a policy, for a small extra fee you can purchase extra coverage under an "Advantage" Policy.
Owners Title Insurance Policy VS. Homeowner's Insurance
To see the importance of having an Owners Title Insurance policy consider the following example. If you bought a home, and never purchased a home owner's insurance policy (also called a "hazard insurance" policy), and that home burned down one week later, you would still be able to rebuild on the land. While this would obviously be a disaster, it is not a total loss. Now assume that you never purchased an Owners Title Insurance policy and one week after your closing there is a knock at your door. It turns out that many years ago a prior owner left this property to his best friend under his Will and it was recently discovered that the person who made this Will was legally insane at the time. This invalidates the Will and under the Massachusetts Intestacy Laws, his grandchild, who is now on your door step, is the true owner of the property. Unlike before, when the house burned down and you could at least rebuild, this is now a total and complete loss for you. You have no ownership rights in this land and no policy to protect you.
What is a Lender's Title Insurance Policy and Why do I have to Purchase One
Your mortgage lender knows about the risk of title defects and will therefore require you to purchase a title insurance policy to protect it called a “Lender’s Title Insurance Policy”. This mandatory policy protects the lender against any title problems that may affect repayment of the loan. The owner’s policy and the lender’s policy are two different policies, and the premiums for both are usually paid by the home buyer. Lender's are quite aware of the potential for disaster in this area which is why they require you to purchase a policy to protect their interest. This policy, however, provides no protection to the home buyer.
Why do I need Owners Title Insurance on a New House
Even if your home itself hasn’t had previous owners, the land that it stands on has. An Owners Title Insurance policy insures you as the owner of a specific piece of property. It clarifies the property rights and insures that your builder hasn’t used it as collateral on another loan, that there are no unidentified easements affecting your property, and that no problems will surface to hurt you later.
Examples of Title Defects
This list shows why it’s important to have an Owner's Title Insurance Policy. Even though the public records are analyzed during the title exam, there are many problems that are impossible to discover—even with the most meticulous search. Any of the title problems listed below can make your house, condominium, and its land worthless and result in a complete "failure of title" (and yes, these things DO happen). An owner’s title insurance policy generally protects you from financial losses caused by the following title issues:
1. Someone has presented themselves as the true owner of the land, but actually is not.
2. There are forged title documents.
3. There are people who claim to have “power of attorney” who don’t really have the legal authority to act for another person.
4. There are deeds delivered after the death of one of the people involved, without the pre-written consent of the deceased.
5. It is discovered that a will isn’t legally valid.
6. A deed is to, or from, a defunct corporation.
7. There are heirs missing or not disclosed in title documentation.
8. Wills were misinterpreted.
9. Deeds were made by people of unsound mind.
10. Deeds were made by minors.
11. Deeds were made by non-citizens.
12. Erroneous reports were furnished by tax officials.
13. Estates were executed with key people absent.
14. There is an undisclosed divorce of a spouse who claims to be an heir.
15. There is a spouse who is supposedly, but not legally, divorced from someone involved in the proceedings.
16. Children were born or adopted after the date of a will that involved the property.
17. Surviving children were omitted from a will that involved the property.
18. Mistakes were made in recording legal documents.
19. Title records were falsified.
20. Creditors make claims against a property that was sold by heirs or other people named in a will.
21. Deeds were made under duress as a last option to foreclosure.
22. Easements (limited rights for other parties to use the land) exist that were not located by a survey.
23. A deed incorrectly identifies public property as private property.
24. There are errors in tax records.
25. There are deeds from a bigamous couple.
26. Representations on legal documents (e.g., Notary seals) are invalid or incorrect.
27. The property was condemned but there is no official record of the condemnation.
266 Main Street, Stoneham, MA 02180
Phone: (781) 438-6600 - Fax: (781) 942-7034 - richard.woods@comcast.net