Unfortunately, people can and do lose ownership or use of property that has been bought and paid for.
Upon purchasing property, a buyer of property generally gets a deed to that property that identifies the property and gets recorded at the county recorder’s office. We usually think that the deed settles all disputes.
However, what if the seller of the property did not own the property when it was sold to the buyer? What if the person who sold the property to the seller was mentally incompetent (via medication or dementia) when that person sold the property to the seller? What if a neighbor has been using the property to access the neighbor’s property in the past and claims that the neighbor can still use the property, even with a new owner?
These problems and many others that can and (more frequently than we realize) do rear their heads after someone has bought and paid for property can be avoided by purchasing title insurance.
If the property purchase is secured by a mortgage, the lender (bank/credit union) who holds a mortgage may require title insurance to protect that lender. However, that insurance only protects the lender, and that insurance does not protect the buyer.
A property buyer can always purchase the buyer’s own title insurance when purchasing property. That title insurance is called “owner’s title insurance”, and, in simplest terms, owner’s title insurance is a guarantee by a government-regulated insurance company that what the buyer’s deed says is what the buyer owns.
Of course, if the deed already says that the buyer owns what the deed says, why not just get the money back from the seller? That work involves legal fees and may not work if the seller is deceased or insolvent.
The cost of owner’s title insurance is proportional to the property’s price. The cost of owner’s title insurance for most home purchases in our region is often a few hundred dollars, a small price to protect one of life’s biggest financial investments.
For property other than houses, owner’s title insurance can also be bought with the property. In these circumstances, owner’s title insurance protects the huge investment made in purchasing property that will be used in business, agriculture or recreation. In these contexts, a common issue that the insurance covers often arises when various non-owners claim that the property line is not where the deed says the property line is or that a non-owner has rights to travel upon or use the property due to an “old deal with a former owner a long time ago”.
Owner’s title insurance provides attorneys to make those unforeseen worries disappear at no cost to the owner.
For concerns about someone using a buyer’s identity to sell or take out a mortgage on property after that property is purchased, buyers should watch their property tax bills and regularly visit each county’s free, websites that allow owners to confirm that their ownership was not taken away through fraud after purchase.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.