February 2015 Newsletter

What is Owner’s Title Insurance and Do I Really Need It?

One aspect of buying real estate is whether or not you will have a policy of title insurance, commonly referred to as Owner’s Title Insurance. From my standpoint as the closing attorney, this is often the most discussed item with a home buyer and something I very much encourage.
Let me first give you a very brief description of what it is. A policy of Owner’s Title Insurance protects the real estate owner against any claim that may arise in the future that potentially affects her ownership interest in the real estate. Examples would be a claim of easement, encroachment/boundary line dispute, lien or claim that originated with a prior owner, heir to an estate, or property that has gone through foreclosure. The policy is valid for as long as the owner owns the property and the premium is paid-for only once at closing.
Oftentimes people will say to me “Why do I need this policy, you’ve already examined the title?” It is a very fair question. Remember however, the Owner’s Title Insurance policy is for claims or issues that arise in the future post-closing; the title examination is a historical look backward in time up to the date of closing. The exam will reveal say a utility easement, but it probably won’t reveal a person’s claim of easement to walk across the property. Also, since Georgia law provides for no judicial oversight of any foreclosure action, the title exam may not reveal if the foreclosed-upon prior owner has an objection to the foreclosure and intends to assert it at some point in the future…as in when you own the property. The title exam has no value when it comes to encroachments or boundary line disputes. And, if buying a newly constructed home, it protects the homeowner against any claim made by a sub-contractor or supplier for non-payment by the general contractor.
Another question or issue that comes up is “I’ve never heard of or known anybody who had to rely on an Owner’s Title Insurance policy; I think it’s a waste of money.” To a certain extent this also is a fair question or point. That said, I’ve never heard of or known anybody who has ever been injured by a Jack Hammer, but that doesn’t mean it doesn’t happen and I’m sure those injured persons exist. Just like people who get injured by Jack Hammers, we hope a title insurance claim or issue is minor and can be resolved in short order without permanent negative impact; however, and probably like most Jack Hammer injuries, many post-closing title claims involve the expenditure of significant monies and time.
Another fair inquiry I get is along the lines, “but this property is in a platted neighborhood with covenants - title should be fine.” First, every title should be “fine” at the time of closing or else there wouldn’t be a closing. Platted neighborhoods with covenants can have their own unique title issues. To wit, the homebuilder placed the home on the wrong footprint resulting in the driveway being poured 6 feet onto the adjacent vacant. The HOA approved the construction plan and nobody thought much of it until the vacant lot owner decided to build his house. Or, the bank who foreclosed on the entire neighborhood prior to any houses being built but failed to address the roads servicing the neighborhood, leaving the roads in the hands of the defunct developer with the new homeowners not having a legal right to access their homes. The list can go on, but I’m sure you get my point.
Finally, I sometimes hear “my real estate agent or loan officer say I don’t need a policy because the lender gets a policy.” This is very bad advice to give any homebuyer, but for those who give it, be prepared to have that owner come back on you if that owner has a title claim. Additionally, every mortgage lender requires a policy of title insurance to protect THE LENDER. The Lender’s coverage effectively allows that Lender to foreclose in the event you default on the loan and not a whole lot more, and offers no, zero, nada, zilch protection to the homeowner.
Let me be fair, an Owner’s Title Insurance Policy is a policy of insurance you hope to never have to use; however, and akin to a Disability Policy of Insurance, it is invaluable when needed. For most people their home is their single largest asset; a policy of Owner’s Title Insurance is one way to protect that investment.

As always, please call me with any questions.
Written by: 
Douglas P. McManamy 
(912) 691-0943 phone 
(912) 691-0947 fax
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