Title Insurance is the Only Kind…..
Title insurance is the only kind of insurance coverage where – if the closing is done properly – the incidence of valid claims can be reduced to almost zero. It’s also inexpensive, and should be part of every real estate sale.
Your homeowner’s carrier can’t make you less clumsy, or your all-wood house less flammable. Your automobile carrier can’t make you a better driver (though those plug-in gadgets that monitor your driving habits try to).
Your life insuror can’t extend your life, and by definition, for every life insurance policy that remains in force for the policyholder’s life, the carrier will eventually have to pay a claim.
As an aside, since “collision insurance” pays if a collision occurs, and “fire insurance” pays if a fire occurs, shouldn’t life insurance really be called “death insurance”? Answer: yes, but then no one would buy it.
Seriously, most title claims arise from inattention to detail. Did the title agent ask for photo identification from all signers? Did the title agent actually look at the photo identification presented? There’s a story, likely apocryphal, about a worker at the Philadelphia Navy Yard who, during World War II, wore an ID badge with Hitler’s picture on it instead of his own; no one ever noticed, or so the story goes, but a word to the wise should suffice: Always check the evidence.
Are the documents set up properly, so that everyone transferring an interest in the property has a signature line? This isn’t the 19th century; when a married couple transfers real property, then both must sign. A “waiver of marital rights” form, which turns up from time to time, won’t replace a missing signature. Period. Full stop.
Did all of the signers actually appear before the Notary Public? Apart from the occasional meretricious impersonation (yes, we had such a case), beware the wife (or husband) who swears that his absent wife (or her absent husband) absolutely, positively signed the document, and begs the Notary to acknowledge it in his or her absence. That puts the Notary’s commission at risk. The “fine print” of an acknowledgment always says that the signer “before me appeared”. Make it so. Otherwise, use a Power of Attorney.
If electronic recording is available and you aren’t using it, why not? Electronic recording eliminates the chance that the mortgagors will leave your office, and go to another closing (and another, and another…) with the result that the property is mortgaged multiple times; in that case, only the holder of the first recorded mortgage is likely to be able to recover (yes, we had one of these, too).
There are other refinements to the closing process that can draw the risk aperture even smaller: a Secretary’s certificate and a properly adopted resolution authorizing the transaction for all corporate signers; a survey of the property to be transferred or mortgaged; and a strictly enforced policy requiring deposits to be made by wire transfer are just a few. In this day and age, when high-quality imaging and printing equipment is available for peanuts, cashier’s checks are just too easy to fake.
When all is said and done, the illegitimate offspring of the third-prior owner may still come out of the woodwork, but that’s unusual (and no, we haven’t seen one of those … yet).