You're all set to plan your housewarming party after letting family and friends know you've bought a new home. But you're stunned when the first person to arrive at the party is none other than the original homeowner, who never sold the house to you to begin with. Unfortunately this is indeed possible -- emphasis on "deed."
In this scenario, what the new buyer didn't know was the realty company was responsible for this. Without either owner's knowledge, that realty company went to a courthouse before the purchase was made, researched which homeowners were out of town and less likely to reside at their property, and made sure they'd had the property for awhile (so as not to trigger the interests of newbie buyers who would be more frantic about visiting their property).
The person posing as a realtor then forged the signature of the real buyer and sold the deed to himself. (It's a bit like writing and depositing a check from your own account into an ATM. It takes time for a bank to realize the deposit came from your own account, but the funds are available immediately.)
Now that the realtor (il)legally owns the property, that same person put it on the market and sold it to you. Even the notary on the purchase is a fake person.
If this sounds too far-fetched to be a possibility, think again. It can happen.
The only way to get around these possible risks, especially when dealing with lesser known realtors, is to purchase owner's policy insurance, which protects people from attacks against an insured property, secures payment of valid claims and monitors third-party sales.
Owner's policy title of insurance also helps avoid other possible fraudulent and monetary risks:
Don't get stuck with repair bills. If the last homeowner had a big home repair job completed but never finished paying the workers, this will be known before the home is purchased. A title professional researches previous pending and unpaid charges on a home, including mechanic liens, real estate property used in place of child support assistance, previous homeowner taxes and unpaid taxes. Make sure to speak with the homeowner or real estate company about risk of any late or unpaid mortgage payments, too. There's no perk of owning property if you inherit someone's debt, too.
Don't be forced to foot the bill on unknown heirs. Maybe the last homeowner didn't disclose to you that that home you now own was supposed to be left in a will for a loved one. An owner's policy title helps protect you for legal defense should that family member try to take you to court.
Safety in numbers finance legal questions. The title insurance company (name found on the title policy) should be able to provide you with answers to both simple and complex queries. Your settlement statement will say HUD-1 if the insurance is included after the final purchase. The onetime purchase will be the value of the home. Although reputable companies will try their best to identify any possible issues during the beginning of the purchasing process, owner's policy of title insurance lasts for as long as you own the home.
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