A Myth About Owner’s Title Insurance

This is Deirdre Brown, your settlement agent serving the District of Columbia, Maryland and Virginia. Today I want to talk to you about whether or not a buyer needs owner’s title insurance if they are purchasing a  property from someone who has owned the property for a long time. Buyers are often given the advice that if the seller has owned the property for a long time they do not need to purchase the owner’s title insurance.  Let me tell you why that is not a true statement. 

This is a real-life case we had recently. Someone who had purchased from an owner, seller number one,  who had owned the property for 30 years. She passed before the sell so it was her estate via her personal representative, that sold the property. Seller number two was the person that purchased the property from seller number one and owns it now and is selling the property. Seller number two has owned the property for ten years.  

We, the title company, start to process the file and we find out that the deed from the purchase by seller number two from seller number one was defective. It had the wrong legal description. They had a legal description for a totally different property. We reached out to the title company that prepared that deed and that title company is no longer in business. We reached back out to seller number two and  he can not find is owner’s title insurance policy but was able to find the  settlement statement so we were able to reach out to the title insurance company that underwrote that transaction. Because the seller had purchased owner’s title insurance we were able to, under that policy, file a claim on his behalf and work with the title insurance underwriter to get a new deed recorded to correct the defect of deed.   

 If that seller who had bought a property ten years ago from someone who owned it for 30 years had not purchased the owner’s title insurance we would have had to go back and try and find the personal representative for seller number one and have a new deed to record in front of this transactions. If we were unable to find the personal representative, seller number two would have had to file a quiet title claim in court in order to sell his property.  This would have been at his expense and would have to take a long time to resolve. Instead his owner’s title insurance policy kicked in and the issue was resolved in time for closing at no additional cost to him. 

This is just one example of how an owner’s title insurance protects the owner of a property. 

If you have title related questions please reach out to us at lexicontitle.com