A woman knocks on your door. She just discovered that 10 years ago, her husband, now deceased, secretly married another woman and bought your house, which that woman sold to you upon his death. She claims your house is part hers because she was legally married to him when he bought it with his unlawful second wife.
Or maybe a lawyer shows up. He explains that the representative of the seller’s corporation who sold you your house had no authority to do so. He claims the sale was unlawful and wants to rescind it.
Perhaps the son of the elderly lady you bought the house from claims that his mother was not of sound mind when she signed the purchase contract. Now that’s she’s better, she wants her house back.
The last thing you want after settling into the home of your dreams is to find out that someone else has a legitimate claim on it. Legal costs to defend property ownership and cure defective titles can quickly escalate. This is why the importance of working with thorough title and escrow officers, as well as comprehensive title insurance cannot be stressed enough.
Here are the top 33 obscure issues that can lead to property loss:
- Deeds conveyed with clerical errors like name misspellings, incorrect property addresses, sometimes properly recorded but improperly indexed.
- Deeds, mortgages or releases forged anywhere in the chain of title. If someone was previously ripped off, they may have a claim on your property.
- Deeds signed over by those unable to legally execute binding agreements, such as minors, those who are mentally incapacitated or trustees not authorized to dispose of property.
- Deeds from a business entity, where those who signed weren’t authorized, or the entity itself was not properly registered, or the entity’s authorization documents were falsified.
- Deeds from legal non-entities, like clubs, associations, churches and charities.
- Deeds conveyed by using an alias or fictitious name.
- Deeds from foreigners who can possibly be challenged as incompetent, unauthorized or not compliant under foreign law.
- Deeds signed over under duress or fraudulent circumstances.
- Deeds transferred through foreclosure, where the foreclosure process wasn’t properly followed.
- Inadequate release of prior mortgage or lien due to investor acquisition of the note, bankruptcy of the creditor, or title transfer improperly processed.
- Deeds conveyed through judicial proceedings like probate or bankruptcy without proper court authorization.
- Deeds signed using a false or expired power-of-attorney.
- Deeds misrepresented as separate property when they are in fact joint or commonly held.
- A deed conveyed to a spouse as sole heir who doesn’t disclose the divorce.
- Deeds conveyed without knowledge or agreement of all heirs.
- Deeds executed by accident.
- Deeds delivered after death or without permission of the grantor.
- Deeds conveyed after administering the affairs of a missing person who later reappears.
- Deeds signed over by government entities that can be challenged as unauthorized or unlawful.
- Deeds conveyed in violation of public policy, such as to repay gambling debt, bribe someone to restrict commerce or pay someone to commit a crime.
- Undisclosed federal, state or local tax liens, alimony or child support liens, mechanics liens, environmental liens, judgments, pending lawsuits that affect the land, or options to purchase the property with first right of refusal.
- Undisclosed covenants or restrictions, easements benefiting the neighbors, boundary, setback or party wall agreements.
- Clerical errors in the tax record causing bills to be mailed to the wrong address, payments applied to the wrong property, erroneous release of liens that are later reinstated or other mistakes by tax office employees.
- Special assessments that become liens once a law or ordinance is passed.
- Misinterpretation of wills, deeds or other documents, or discovery of a will, or a later-dated will after probate has been administered.
- Defects in recorded instruments, such as incorrect or inadequate legal description of property, no notary acknowledgement, or forged notarization.
- Deeds not properly recorded.
- Deeds acquired fraudulently from the prior owner.
- Undisclosed claimed prescriptive rights, for example, where someone has claimed part of your property through adverse possession.
- Right of access obliterated by foreclosure of neighboring property.
- Deeds conveyed with legal access subject to undisclosed restrictions.
- Dubious conditions, covenants and restrictions in decades-old documents.
- Pre-existing violations of zoning ordinance, subdivision mapping laws, and conditions, covenants and restrictions that affect the property.
A good quality owner’s title insurance policy will protect you from these kinds of situations and more. A less robust policy, however, won’t cover every issue.
It’s important to shop carefully for a good title policy. Ensure your real estate agent asks each title company for a laundry list of coverage and compare side-by-side. Check reviews online to see how smoothly claims are handled, arguably the most important measure of any insurance company. And last, compare prices. Cheapest is not always best.