Blog
Title Insurance and Other Things to Know About Buying Real Estate
By Robin Wyatt
May 1, 2022
I did not say things to know about buying a house, I said real estate and real estate is dirt, that stuff we walk on, the stuff we dig out to build a basement or pour a foundation on, the stuff the pool sits in, or we walk around, smiling and thinking to ourselves, “This is mine."
This is mine, how do I know it's mine, how do I know that the person I just paid a lot of money to owned this place I call a home, how do I know how big the property is, how do I know that very important structure called a house, the building I have decided I want to live in, is on the land that I have bought? What is my guaranty?
It's the title insurance and specifically the owner's title insurance policy. You are buying the land as much as you are buying the house and the history of that land can be complicated. The ownership doesn't start when the house is built. Clear title starts with, “In the Beginning." As attorneys we do not have to go back to biblical times, but Georgia Law requires us to search back a minimum of 50 years to determine that ownership is clear of claims that could be made against the property.
Digging into History
There is not a neat little folder in the clerk's authority computer records or file at the courthouse marked "2194 North Road, Snellville." Not a single source that shows everything that might be part of the story of this property or any property including the property that you are buying. I use the address of my office because I know a little about it, as I know a little about the history of Snellville. I do not have to go back to the beginning of the crossroads community known as New London but to search the title to my office I would have to get back to just after World War II and my title is not complicated.My half acre was owned by a man whose family owned many acres on North Road when it was a dirt road. A title examiner would start with my name and find that I bought it from a man whose last name was Williams. The examiner would then keep going back in the indexes to find that my seller received the property by deed from his father, if this wasn't more than fifty years ago, the examiner would have to then find when the senior Mr. Williams was deeded the property. As the Williams family were founders of this community this could be endless.
My half acre only became a half-acre when my seller was deeded the property in the late 50's. Before that it was part of a larger piece and before that an even larger farm. If you are buying a home on a lot in a subdivision, that property only became that size when the developer divided it, before that it may have been part of a farm or several other pieces of land. The examiner must look at the descriptions to make sure the deeds are accurately describing the property. We must look at the larger tracts of land that the property was once a part of to establish title. This is extremely difficult without a survey. Fortunately for me, in farm times around here, people routinely had a plat drawn of their property and had it recorded.
When the Real Examination Starts
Once the examiner has found a good beginning point, the real examination starts. Coming forward from that owner over fifty years ago, they must see what that person or persons did. Not just with the land but what in their life might have affected the title. The first task is to make sure they conveyed the property correctly, that the names match and the property description is accurate. To make sure Daddy didn't forget and convey the same land to both sons. Or that Daddy forgot that Momma was on title too and no one thought to get her to sign the deed. These are real examples that I have seen in our title reports.
The examiner must check probate records in probate court, lawsuits in the Superior Court, possibly even divorces. We look at there are liens against the property. They are the right of creditors that have sued and now have rights to collect against the value of the property being sold, even if the current seller is not the debtor. Property tax liens, federal income tax liens, state income tax liens, Federal criminal liens, bail bonds and bankruptcies can affect the clear title and the ability of the seller to sell to you without sticking you with some of these problems. Again these liens may have been incurred by a previous owner and not your seller.
Purchasers see that title insurance is optional and sometimes want to waive it. They see that the lender is being insured but don't realize that the lender's coverage will not extend to them or even to cover their liability to the lender if there is a title issue. We examine records to the best of our human ability as professionals. We have knowledge and experience, but mistakes can happen. More often some title issues are not evident on the records. Remember I said the previous owner of my property was named Williams and that Snellville was founded by Williamses. How many of those names are on the record that my examiner must wade through and hope they don't miss one, one who has been sued or owes taxes. Easements granting another person a right to use property belonging to someone else are not universally required to be recorded. If it is not, we cannot find it with a title examination.
What a Title Exam Reveals
A title exam will not reveal that someone has built over a property line, building permit violation, forgeries, covenant violations or other title claims that are not recorded in the courthouse. Purchasers will say that they are buying a house in a subdivision that has been around awhile, there cannot be claims that have not already been found. Ah, but they are wrong.
In Cobb County, there is a subdivision where all the owners of houses received a shock one day a few years ago. They each received a letter from an attorney asking for $100,000 per household from the true owner of the property, one Mrs. Annie Smith. Well, Annie was the owner of the property and she had just been released from prison after serving a twenty-year sentence. She was happy to be going home to her farm. But her farm was now a subdivision. The developers had bought the property from the occupants of the farm who were Mrs. Annie Smith's son and his wife, also Mrs. Annie Smith. The attorneys had run the title, seen that Annie Smith owned the property and the woman at the closing was Annie Smith, just not The Annie Smith. The homeowners who had owner's title insurance did not even have to hire attorneys to represent them. The title companies did. They also negotiated a settlement that did benefit the owners without title insurance. They only had to pony up about $45,000 each. The insured were covered and paid nothing.
A Neighborhood in Gwinnett County
Here in Gwinnett County , there is a thriving and beautiful subdivision with a bit of a past. About 15 years or so after its final home was completed, the SBA came forward and sent letters to each homeowner apprising them that the original developer had taken out a three million dollar loan and the security instrument was not indexed right in the records. It was a lien nonetheless and the SBA would be happy to let them pay the money back without interest. The winners -- the SBA and the owners with title insurance. The losers - the owners without title insurance. I earlier mentioned that looking back into the back chains of a title we can find surveys recorded. That is not the case since about 2000 as surveys have become casualties of people trying to make real estate purchases cheap. In some cases, the initial purchase of the raw land to build the subdivision is not surveyed. The counties do require that the developer have a plat of the subdivision and it is recorded. Even these have issues when the developer tries to later change the shape of a lot but after selling the adjoining lot. There is not likely to be a survey of the exact piece of property the seller is conveying to you and certainly not one recorded in the courthouse records. A title exam will not reveal additions a seller may have made to the property being sold unless the seller specifically relates that they have added property to their initial purchase. Subsequent additions are not in the chain of title an examiner follows through the records.
The Benefits of Title Insurance
Title Insurance covers these nightmares. The enhanced policy offers coverage for survey matters and covenant issues. The enhanced policy will cover post policy forgeries, encroachments, claims of adverse possession and claims of unrecorded easements. It is a one-time only premium, it is never paid again and the policy lasts for your lifetime. Even beyond your ownership of that specific property. If a buyer makes a claim against you for a matter discovered after you sell, your policy is still in effect.
You may say you don't hear of title claims being paid; they are. The title companies in Georgia have paid many millions in claims in just the last year. However, the biggest benefit is the clause in the policy that insures marketability of the property. The closing attorney may not be willing to allow the closing to take place because he or she may become liable for a defect in the title. It doesn't mean that someone is actually clamoring for money but it is that someone could come crawling out of the past, especially since the banking crash.
Why Choosing C. Robin Wyatt, P.C. is a Smart Choice
As a closing attorney with liability, I know that I don't want to pay a long-shuttered bank the equity line that everyone says was paid at the last closing, but if I have no evidence of this, there is no release of the lien. It's a risk I don't want to take. But I can easily ask the seller, “Do you have an owner's title policy? I know this old loan isn't yours, but it is attached to the property. I cannot ignore it.” If they have owner’s title insurance, I contact the title insurance company that I am writing the new policy on and ask them to insure over the problem. This happens a dozen times a month in our office, and C. Robin Wyatt, P.C. is a small office. The seller's title insurance allows us to move forward without delay, Buy the title insurance. The lender makes you pay for theirs and they won't lend money without it. Commercial owners will not purchase property without it, with good reason. It is peace of mind coverage. You pay once. It may keep your life moving by allowing a closing to move forward even with a title flaw, it may stand between you and a nightmare.