From time to time, relationships can break down with folks who you own significant property with, such as a spouse, partner, or siblings once an estate is inherited. It’s an unfortunate reality between co-owners, but it happens all the time, and real estate can get caught up in the fray.
When a deed has multiple owners listed, it requires that each party sign paperwork in order to legally transfer the deed to someone else. However, that doesn’t stop people from trying.
In the example of a divorce, real estate is often the biggest asset between the couple. During arbitration and/or court proceedings, it is typically decided that the real estate at hand is transferred to one of the individuals as part of the agreement, or both individuals agree to sell it together with proceeds to be distributed however it is agreed upon.
Again, that doesn’t mean that people try to bypass the process. Through forgery or other means, a partner, ex spouse, etc., may get away with selling the property before anyone catches on. As a victim, you are now faced with a co-owner who has all the proceeds from the sale, and someone else who now has a claim to the property itself.
How Title Insurance Helps
Title insurance helps in these situations. By having a title policy in place, the buyer who unknowingly bought the property will be made whole again and the co-owner who illegally sold the home will be sought after by the title company. You will then get the property back. With a title insurance policy in force, this is all handled with little to no legal complexity or heavy lift on your part.
How a Title Search Helps
A title search is typically performed before a property sale and before a title insurance policy is issued. Most title searches would catch this type of malfeasance, but there’s always the chance that things slip through the cracks.
What Happens If There Isn’t Title Insurance?
Not having a title insurance policy to lean on in these situations doesn’t mean you no longer have a legal claim to the property or proceeds at hand. However, it does make things much more complicated. At this point, your only recourse would be complex, expensive and often drawn-out legal action involving multiple parties (the co-owner, the buyer of the property, and yourself.) If you are OK with letting the buyer keep the home, it could be less complicated as you’re now only looking to claim your share of the proceeds from the co-owner. If you do want to property back, it will be much more involved.
With any real estate transaction, it is strongly advised that you seek professional guidance and consider a title insurance policy on your home. These policies are largely inexpensive considering the cost of other types of insurance, but the impact can be huge should you ever need it.
Again, a title search will very likely catch these types of issues, however, that is the purpose of insurance: You put policies in force (such as fire, flood, auto, life, etc.) with the hopes that you never need to use it. Like, any other event or loss, the financial and emotional cost of not having a policy in place can be devastating.
Principle Abstract and Settlement Services has years of experience performing robust title searches and protecting buyers from any issues that might come up.
Looking to buy a home? If so, contact our office and a member of our team will be happy to assist you.