10 Common Title Problems and How to Fix it

Are you recommending title insurance to your customers?

One of Benjamin Franklin's famous quotations says "Don't be penny wise and pound foolish". It is amazing how many different situations to which that 200-year-old statement applies in our modern business world.

Because the purchase of a home is one of the largest investments the average American will ever make, they should protect that investment with owner's title insurance at settlement.

An older title insurance company brochure we have at our office is entitled "70 something ways to lose your property". All 73 are actual title insurance claims by buyers who were glad they were covered by an owner's title insurance policy when a title problem was uncovered after the purchase of their property.

Here are 1O of the most common title problems which leave homeowners with the potentially ruinous cost of defending their property rights in court if they don't have an owner's title insurance policy:

1. Forged deeds, mortgages, mortgage satisfactions and releases.

2. A deed signed by a person who is mentally incompetent or under undue influence or duress of family member or caretakers.

3. A deed from a corporation, partnership, LLC or Trust (think builders or investors) without authorization or signature of the proper officers, partners, members or trustees.

4. A deed to or from a corporation after they has forfeited their charter and are no longer in good standing with the State of Maryland.

5. A deed conveying land involved in bankruptcy, divorce proceedings or foreclosure which deed was unauthorized by the court.

6. A deed executed under a falsified power of attorney.

7. A deed affecting property of a deceased person in which the proper heirs have not consented by their signatures, such as a person who was left a life estate in a will but only the personal representative signed the deed.

8. Ineffective or non-existent release of a prior mortgage which was paid off.

9. Undiscovered but recorded federal or state tax lien or prior mortgage.

10. Incorrect legal description or indexing by the clerk of the court's office.

In this era of identity theft, disgruntled divorcing couples, computerized counterfeiting and inexperienced title clerks it is not difficult to imagine the above scenarios taking place.

For a one time premium included in the purchaser's closing costs, owner's title insurance companies agree to reimburse homeowners for loss suf­fered due to covered defects that exist prior to settlement up to the amount of the policy, including legal defense costs.

The prudent real estate agent always advises their buyers to obtain a home inspection, a termite inspection, a well and septic report, a home warranty, a local mortgage company, a competent real estate settlement attorney and an owner's title insurance policy. Advice to the contrary is being "pound foolish" and leaves the buyer unprotected.

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Patrick L. McLister has been a lifelong Maryland resident, and practicing law for over 30 years. He obtained his law degree from the Washington College of Law at American University in 1984. He earned his undergraduate degree from West Virginia University after attending Wootton High School in Rockville, Maryland.

Pat was a Judge Advocate in the U.S. Marine Corps, attaining the rank of Captain, prior to coming to Frederick. He has received numerous awards throughout his professional life, including the Frederick County Association of Realtors® Affiliate of the Year. He is a past member of the FCAR Board of Directors and Past President of the Jeanne Bussard Center for disabled individuals.