Consider this scenario…
The closing is scheduled for tomorrow. The title company receives the binder and immediately places a call to the realtor indicating the whole thing might not go down. A couple of judgments and an unreleased deed of trust (from two decades ago) on title is threatening the thwart the transaction and demolish future plans of all parties partaking in the sale. Enough to make you run for a bottle of antacid? We think so, too.
Your Owner’s Policy, the Hero
What do you do? Well, that depends on which side of the transaction you’re on. If you’re the seller, having an Owner’s Title Insurance Policy covers your interests, likely without even having to file a claim. Clouds or defects on title not identified at the time of your purchase of the property are, in fact, covered by title insurance. Without an Owner’s Policy, however, you may have to say goodbye to selling your house and hello to a whole host of other issues.
On a side note, and speaking directly to the hypothetical situation described above, you can file a claim if the buyer’s side won’t accept anything other than release of deed of trust.
View From the Other Side
What if there is no owner’s policy? How does this affect the buyer? The title has to be cleared before purchase, of course, which may increase the time it takes to close. If the owner cannot convey clear title, however, the buyer may back out of the transaction (provided the buyer isn’t in breach of contract), and receive a refund of any deposits applied toward the property.
When Might a Claim Need to Be Filed?
Having an Owner’s Policy is a must when protecting your interests surrounding a property. As well, you never know when an unforeseen issue may arise and threaten your rights to your home, forcing you to file a claim against your policy. Some of the most common reasons for filing a claim include:
- Foreclosures with title issues (the bank would file a claim against the owner’s policy)
- Unreleased deeds of trusts
- Judgments against prior owners who weren’t found during title search or missed by the underwriter
- Undisclosed or long lost heirs to the property
- Buyer’s side fails to accept Owner’s Policy
In such a situation as those listed here, the buyer’s side could allow the seller to indemnify, but the seller assumes responsibility for defects on title in the future.
Who Files, and With Whom?
The party filing the claim all depends on the nature of the situation. With an Owner’s Policy comes a claim form that should be completed and submitted to the underwriter as soon as possible. On it, assuming you’re the party filing, you’ll need to describe the details of title clouds or other circumstances preventing you from selling your property.
What to Expect
The Process: The underwriter’s attorney on staff will act on your behalf, taking care of all necessary paperwork. Since he/she will proceed in your best interest, there’s generally no need to seek counsel on your own accord.
Timeframe: The time is takes to work out all the kinks is circumstantial, depending on the situation and its complexity. Processing the claim could take anywhere from one month to a year.
Potential Outcome: If you’ve covered yourself with an Owner’s Policy and were issued clear title, the claim will typically pay out. Depending upon the title issue, for example the discovery of a long lost heir, the resolution may result in the loss of the property; however, you’d still be compensated for the loss by your Owner’s Policy.
The lesson to be learned is, of course, the dire need to have an Owner’s Title Insurance Policy. Ensuring swift action at the first hint of a title problem is also key to preserving your real estate interests. For more information on Owner’s Title Insurance, contact Linear Title & Escrow at (757) 340-0340 today.