Is stealing a house really a big problem?

[Gregg]

Somebody want to help explain what I'm paying for when I have to hand out checks at a closing, and what I'm not?

First, what is Title Insurance and who does it protect? One of the things I pay for is Title Insurance. I was under the impression that this covered me, and my lender, if the lawyers I paid to prove the guy selling me the house had title to it, are wrong. (and if they were, why I can't I or my lender just sue them?) I've been told any number of times that's not what it does or who it protects. Someone, who was trying to sell me something, told me with a straight face that it protected the Title Company and the person who sold me the house they didn't own, if I or my lender sues them for selling me a house they didn't own. That's just stupid enough to be true, now that I think about it.

Second, I know what a Title Search is, I even know how to do one. Seeing as I pay for my lawyer to do one, my lender's lawyer to do one and the Title Company to do one, is it a big problem that all these people look it up and are wrong? And if they are, is someone gonna show up and tell me I have to move?

There is some company running a lot of ads on AM radio and Sirius XM about how online scammers are gonna take out billions of dollars of mortgages and if I don't pay them to ''lock my title down'' electronically, I'm going to be homeless within the month. Is that remotely possible?

If JP Morgan Chase writes someone a check for a million dollars because they say they own The Well Armed Bunker Complex, someone tell me why JP Morgan Chase isn't on the hook for that because someone lied to them and they should have checked before they gave them a bunch of money? Failing that, why isn't ...wait..I can actually see why Title Insurance doesn't pay it, or mine, I think its because they are only insuring that when I bought it, the guy selling it had a right to....okay. Am I right?

But how in the hell can some lender come to me and say "We gave some guy a million dollars, and you are the one who does own the property, so you have to pay it back because, well, we were stupid, but we're too big to fail?

Can someone give me a little reason to not fear getting kicked out next month?

[AndyK]

...
Can someone give me a little reason to not fear getting kicked out next month?
...

Perhaps because whoever attempts to take the residence will have to circumnavigate the land mines and then overcome the pack of rabid, attack-trained wiener dogs?

[Pottapaug1938]

I used to work for a title insurance company, back when I was practicing law.

Title insurance protects you from defects in the chain of title. As I recall, those defects can arise from things like improper indexing, ambiguous surveys, outright fraud, and the like. Incompetence of title searchers and attorneys can also be a factor.

Let's say that you buy your dream home; and after the closing, your new neighbor informs you that he has an easement over your property, right where you planned to put your new in-ground swimming pool; or that the local power company has an easement, for a new transmission line which they plan to construct, right through the middle of your brand-new house. Or, let's say that the seller of your house had a lien on his real estate; and the lien was overlooked during the title search. Perhaps the neighborhood children have been cutting across your oceanfront property, for over 60 years, to get to the beach. Maybe the person who you THOUGHT was the seller was an impostor.

In each case, you're facing lengthy, and expensive, litigation and negotiation. Without title insurance, that comes out of your pocket. Yes, you can sue the lawyer; but if he is a drunkard, a thief, a scoundrel, or all three, you may find out that he either 1) has no assets to satisfy a judgment against him, or 2) has hidden them where no one can find them. With title insurance, the insurer pays for those costs -- and if they see anything sketchy in your chain of title, they will exclude that from coverage, so you will want to address that issue, well before the closing.

Yes, the bank will demand a title insurance policy; but that covers only them. They don't want to lend hundreds of thousands of dollars, for real estate, without knowing that they are protected in case a title defect asserts itself. Prudent owners will buy a policy covering themselves; and that policy is in force for as long as they own the property.

[AnOwlCalledSage]

I used to work for a title insurance company, back when I was practicing law.

So what you are saying is that the US still follows the rules of the wild west. What you describe is that flimflammeery is an accepted method of property conveyance!

[Gregg]

In the UK, if I understand it correctly, the Land Registry Records are all that matter, and if you can convince them to record a document its not easy to correct it if they're being tricked.

Over here, also I think and also subject to local rules in each of the 50 states that might be different, the County Clerk will fine whatever document is presented to them, even if its on its face outrageous. They tend to fall back on some version of "The Clerk is not Practicing law and is not qualified to judge the validity of what some nutter might bring in". So over here, you attack the document and what it stands for, and not the clerk who let it be filed, or the fact that its been filed.

Its a fine distinction, and its not improbable that I'm entirely wrong on that, but that's how I understand it, right or wrong.

[AnOwlCalledSage]

In the UK, if I understand it correctly, the Land Registry Records are all that matter

No. That is not correct or Rekha Patel would be sitting in her cottage watching Wimbledon right now with a glass of Pimms. A UK court can make an order to change the registry entry. All that is at stake is whether the solicitors involved have to cough up, or whether the land registry has any liability. A UK Land Registry entry is not the sole arbiter of the owner.

[Pottapaug1938]

I used to work for a title insurance company, back when I was practicing law.

So what you are saying is that the US still follows the rules of the wild west. What you describe is that flimflammeery is an accepted method of property conveyance!

Not at all. What I am guessing you refer to when you refer to "the rules of the wild west" is what we call a "race jurisdiction", in which the first to record a document prevails against anyone who records afterwards.
From the site https://www.dummies.com/education/law/d ... -statutes/:

Notice acts: About half the states have recording statutes called notice acts, which protect a later purchaser of an interest if she didn’t have notice of the prior interest, whether through actual notice, by means of the public records, or otherwise.

A notice statute may say something like this: “No interest in real property shall be good against subsequent purchasers for a valuable consideration and without notice, until the same be recorded according to law.”

Race acts: Only a few states have the kind of recording statute known as a race act. These statutes make a prior interest void against a later interest if the later interest is recorded first.


A race statute may say something like this: “No conveyance of an interest in real property shall be valid against third parties until it is recorded according to law.”

Race-notice acts: The most common type of recording act is the race-notice act, which combines the requirements of the notice and race acts. That is, a prior interest is void against a later interest if the later interest holder paid value without notice of the prior interest and recorded her interest first.

A race-notice statute may say something like this: “Every conveyance of real property is void as against any subsequent purchaser or mortgagee of the same property, in good faith and for a valuable consideration, whose conveyance is first duly recorded.”

[Gregg]

In the UK, if I understand it correctly, the Land Registry Records are all that matter

No. That is not correct or Rekha Patel would be sitting in her cottage watching Wimbledon right now with a glass of Pimms. A UK court can make an order to change the registry entry. All that is at stake is whether the solicitors involved have to cough up, or whether the land registry has any liability. A UK Land Registry entry is not the sole arbiter of the owner.

the rest of that sentence was

and if you can convince them to record a document its not easy to correct it if they're being tricked.

Anything can be fixed, even my right arm almost works, but over here you are attacking the document and over there you're attacking the registry. Rekha is a perfect example, she got away with constantly re-occupying the place any number of times, and at least in part because for quite a while the Land Registry showed a string of people and trusts and such that should never have been listed. To get it corrected, the Land Registry had to be altered. Over here, it is my understanding that you don't try to get the Clerk of the County Court to change their records, they just file whatever is brought to them, you would challenge the validity of the document which is recorded at the Clerk's office. Like I said, its a fine distinction, but I think an important one.

[The Observer]

Can someone give me a little reason to not fear getting kicked out next month?

Depending on the circumstances, there is always a chance that you could get kicked out of your house as the result of phony papers being recorded or filed. In fact, you could come home one day and find your house leveled and scraped up and shipped to the nearest landfill because someone convinced a demolition company it was their house and they wanted it gone.

I have had to deal with bad title actions regarding home sales and the title insurance company missing a lien against the property and issuing clear title to the next owner. It happens. My most interesting case was where the subject property had a lien against it when it was sold and the title company missed the lien. The property sold two years later and the new title company also missed the lien. Guess who was on the hook for that debacle? The second title company.

Which is why Pottapaug is exactly right about ensuring that you have a title insurance policy for your protection. Clouded title actions are ugly and expensive, and if you have a policy, the title insurance company either pays you off, resolves the title or gets sued by you for non-performance. Most of the time, they are going to work their butts off to get the title cleared.

[Gregg]

But how likely is it that someone who I don't know can go on the internet, file their own deed and then borrow a million bucks, and flee to Panama? And further, while they're enjoying the beaches and lack of extradition, how likely is it someone will seriously come and expect me to pay that million dollars back?

I have private title insurance on both houses, the cost to me seemed entirely reasonable. But is the company trying to tell me that the above thing happens every day and I'm lucky it has happened to me yet as nuts as I think they are?


Because to me, if someone gives someone else a loan without checking to see if they own the house, it seems like that is firmly in the SEP, Somebody Else's Problem, category. I might need to send lawyers guns and wiener dogs, but its not something that can't be fixed with a little expense I'm willing to take on if were to happen.
.

[fortinbras]

My wife and I were nearly swindled out of our house by a crook who made a persuasive pitch that he must must must have an address in our school district by Labor Day for the sake of his dear children, so would we please please please cut the red tape and turn over the house to him right away and all those pesky details about money can be handled afterward.

He even claimed the money was coming from the UK via an escrow company that night and we sat up in our broker's office till the escrow company closed at 11:00 pm. No such money, the escrow company had never heard a word of this transaction, and the UK source of funds didn't know anything about it either. Turns out this was all a fake but we wouldn't turn over the keys to him and eventually he stole someone else's house - moving in as a renter moved out and just holding himself out as the new owner until the real owner showed up with the cops and had him arrested and subsequently convicted.

[eric]

The issue of title insurance here in Alberta is usually quite more mundane. Although it is surprisingly easy to commit title fraud, the situations where this insurance can help you out are usually much more basic. The insurance can help you out in the following simple situations:
1. Builder's liens are simple and easy to register in Alberta but hard to track and can happen after the fact. You buy that brand new house in a new development and two months later you get a letter stating that you owe a sum of money to the company that did your roof since the developer is late paying his sub trades and the lien is against the property. The developer is the one who really owes the money but now you have to chase him down which is just more frustration.
2. You buy a foreclosure property. Good deal, you are dealing directly with a professional seller - the mortgage holder. They understand how difficult it is to track down old liens so they won't sell it to you without title insurance.
3. Compliance - the seller had done all sorts of upgrades to the home such as a party bathroom and finished basement. Although your Real Property Report which deals with exterior structures and Home Inspection indicated no issues things can bite you in the butt later when the pipes start to leak and you find that no building permits were issued, the work wasn't up to Code and the local municipality wants to make an example of you.
4. Boundaries, utility easements, and squatters rights. Where a fence, driveway, or power line is located might seem simple but might cause problems later. It's something that I have personal experience with. For about 50 years from what I can tell my property has had an unusual jog in the fence line with one neighbour that works to both our advantages and is just based on a handshake agreement - I get an extra six feet in the back of my property, but lose it on the front half. We both make sure that we keep each other informed of what is going on with this no-man's land so troubles don't escalate. Only have had one major issue - one of what was technically my trees blew over and destroyed one of his tenant's houses. The tenant sued me, my defence was that said tenant did not allow me opportunity to adequately care for said shrubbery and in an oddity peculiar to Canada any portion of a tree that happens to cross property lines becomes shared property, even if it is only for seconds as the tree falls.

[AnOwlCalledSage]

For about 50 years from what I can tell my property has had an unusual jog in the fence line with one neighbour that works to both our advantages and is just based on a handshake agreement - I get an extra six feet in the back of my property, but lose it on the front half. We both make sure that we keep each other informed of what is going on with this no-man's land so troubles don't escalate.

It would be your land in England! The rules of adverse possession have been tweaked but they are:

* after 10 years’ adverse possession, the squatter will be entitled to apply to be registered as proprietor in place of the registered proprietor of the land

* on such an application being made the registered proprietor (and certain other persons interested in the land) will be notified and given the opportunity to oppose the application

* if the application is not opposed (by ‘opposed’ we mean that a counter notice is served; see Giving counter notice to the registrar in response to notice. Instead, or at the same time, the registered proprietor may object to the application on the ground that there has not been the necessary 10 years’ adverse possession; see Objecting to the squatter’s application for the implications of such an objection.), the squatter will be registered as proprietor in place of the registered proprietor of the land

* if the application is opposed, it will be rejected unless either:

> it would be unconscionable because of an equity by estoppel for the registered proprietor to seek to dispossess the squatter and the squatter ought in the circumstances to be registered as proprietor
> the squatter is for some other reason entitled to be registered as proprietor
> the squatter has been in adverse possession of land adjacent to their own under the mistaken but reasonable belief that they are the owner of it, the exact line of the boundary with this adjacent land has not been determined and the estate to which the application relates was registered more than a year prior to the date of the application.

* in the event that the application is rejected but the squatter remains in adverse possession for a further two years, they will then be able, subject to certain exceptions, to reapply to be registered as proprietor and this time will be so registered whether or not anyone opposes the application

[Pottapaug1938]

But how likely is it that someone who I don't know can go on the internet, file their own deed and then borrow a million bucks, and flee to Panama? And further, while they're enjoying the beaches and lack of extradition, how likely is it someone will seriously come and expect me to pay that million dollars back?

I have private title insurance on both houses, the cost to me seemed entirely reasonable. But is the company trying to tell me that the above thing happens every day and I'm lucky it has happened to me yet as nuts as I think they are?


Because to me, if someone gives someone else a loan without checking to see if they own the house, it seems like that is firmly in the SEP, Somebody Else's Problem, category. I might need to send lawyers guns and wiener dogs, but its not something that can't be fixed with a little expense I'm willing to take on if were to happen.
.

Your scenario is possible, but unlikely. It is much more possible that a piece of real estate might have an overlooked easement, a murky chain of title, or some other issue affecting the quality of one's title. Litigation concerning the adverse interest can be long, nasty and expensive. Title insurance, like all insurance, gives you peace of mind. In this case, a property owner can know that, if someone pops up and claims an adverse interest in someone's land, the title insurer will pay for the defense of the title to that land. If the property owner is forced to move, the title insurer will pay appropriate compensation to the owner.

Again, "checking to see if they own the house" might be done by a lawyer who is a drunkard, thief, and scoundrel, who even when sober is incompetent. He/she may not have enough assets to satisfy a judgment, especially if their malpractice insurance is inadequate or nonexistent; so suing him/her would be an exercise in futility.

[eric]

For about 50 years from what I can tell my property has had an unusual jog in the fence line with one neighbour that works to both our advantages and is just based on a handshake agreement - I get an extra six feet in the back of my property, but lose it on the front half. We both make sure that we keep each other informed of what is going on with this no-man's land so troubles don't escalate.

It would be your land in England! The rules of adverse possession have been tweaked but they are:

Same/same here in Alberta. That being said, one of the legal remedies is to show that you still have an interest in said property and you are simply "loaning" it to the squatter. On my house lot, the property of mine that I have "loaned" to the neighbour must be kept clear of any permanent structures, cannot be used for storage, and the squatter cannot derive economic advantage from it. His assorted tenants get more grass to cut and some shade trees and I gained more room for my fruit trees and not having to deal with the fact that these shade trees require expensive maintenance.

[Gregg]

But how likely is it that someone who I don't know can go on the internet, file their own deed and then borrow a million bucks, and flee to Panama? And further, while they're enjoying the beaches and lack of extradition, how likely is it someone will seriously come and expect me to pay that million dollars back?

I have private title insurance on both houses, the cost to me seemed entirely reasonable. But is the company trying to tell me that the above thing happens every day and I'm lucky it has happened to me yet as nuts as I think they are?


Because to me, if someone gives someone else a loan without checking to see if they own the house, it seems like that is firmly in the SEP, Somebody Else's Problem, category. I might need to send lawyers guns and wiener dogs, but its not something that can't be fixed with a little expense I'm willing to take on if were to happen.
.

Your scenario is possible, but unlikely. It is much more possible that a piece of real estate might have an overlooked easement, a murky chain of title, or some other issue affecting the quality of one's title. Litigation concerning the adverse interest can be long, nasty and expensive. Title insurance, like all insurance, gives you peace of mind. In this case, a property owner can know that, if someone pops up and claims an adverse interest in someone's land, the title insurer will pay for the defense of the title to that land. If the property owner is forced to move, the title insurer will pay appropriate compensation to the owner.

Again, "checking to see if they own the house" might be done by a lawyer who is a drunkard, thief, and scoundrel, who even when sober is incompetent. He/she may not have enough assets to satisfy a judgment, especially if their malpractice insurance is inadequate or nonexistent; so suing him/her would be an exercise in futility.

But as the guy who does own the house, and not the guy who gave someone else a million dollars, is that not a problem for the bank to figure out, and not so much me? Aside from the hassle and relatively minor expense of saying " I didn't borrow the money, and whoever told you they could encumber my house to borrow, couldn't" with extreme prejudice why should I worry about it?

[Pottapaug1938]

Again, "checking to see if they own the house" might be done by a lawyer who is a drunkard, thief, and scoundrel, who even when sober is incompetent. He/she may not have enough assets to satisfy a judgment, especially if their malpractice insurance is inadequate or nonexistent; so suing him/her would be an exercise in futility.

But as the guy who does own the house, and not the guy who gave someone else a million dollars, is that not a problem for the bank to figure out, and not so much me? Aside from the hassle and relatively minor expense of saying " I didn't borrow the money, and whoever told you they could encumber my house to borrow, couldn't" with extreme prejudice why should I worry about it?
[/quote]

The bank may well "figure it out"; but if the title defect forces you to move, the bank's title policy makes only THEM whole. You are out your equity, your moving costs, and a lot else, unless you have an owner's policy. You also assume that YOU are the guy who does own the house; but let's say that the guy who sold you the house bought the house from a seller who knew nothing of any title defects when he bought it -- and the title defect doesn't show up until, after you've owned the house for a while, the REAL owner shows up and says "get outta my house", or the power company shows up and says "you'll have to move your house, because we have an easement right through your living room, for a new power line."

[Pottapaug1938]

Here's a link to a site which explains why title insurance is important:

https://www.firstam.com/title/az/resour ... rance.html

As they point out, owner's title insurance protects you against:

Forged deeds, mortgages, satisfactions, or releases
Deed by person who is mentally incompetent
Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized, or defective under foreign laws
Deed challenged as being given under fraud, undue influence or duress
Deed signed by mistake (grantor did not know what was signed)
Deed executed under falsified power of attorney
Undisclosed divorce of one who conveys as sole heir of a deceased former spouse
Deed affecting property of deceased person, not joining all heirs
Deed recorded but not properly indexed so as to be locatable in the land records
Undisclosed but recorded federal or state tax lien
Undisclosed but recorded judgment or spousal/child support lien
Undisclosed but recorded prior mortgage
Undisclosed but recorded boundary, party wall, or setback agreements
Misinterpretation of wills, deeds, and other instruments
Discovery of later will after probate of first will
Erroneous or inadequate legal descriptions
Deed to land without a right of access to a public street or road
Forged notarization or witness acknowledgment
Deed not properly recorded (wrong county, missing pages or other contents, or without required payment)
Deed to a purchaser from one who has previously sold or leased the same land to a third party under an unrecorded contract, where the third party is in possession of the premises

[davids]

Assuming you are in a State which has a nonjudicial foreclosure process, if some lender had been duped into loaning money to someone thinking it was you Mr. Homeowner, and tried to collect from Mr. Homeowner, they would have to send notices. And they would have to file a Notice of Default and serve it on you. At that point you would know something was wrong. At that point you would hopefully lawyer up and either convince them it was fraud (against both you and them), or you could seek an injunction to stop the sale.

If it is a judicial foreclosure state, the lender would have to file a lawsuit to foreclose, and would have the burden of proving they are entitled to do so.

If it is just a matter of credit reporting, you could dispute any adverse reporting and file suit over that if necessary.

I'm not sure if that answers your question.