Dirty Deeds

In a market like this, virtually every person and company is looking to save a buck or two. In a real estate transaction, that can mean combing through the lines of a HUD-1 Settlement Statement with a ruler and pen in an attempt to get costs down. One line item where the pen may land is on owner's title insurance. So the theory goes, "They already did a title search, why am I paying for this policy?"

Good move?

Not so much. Below is a list of faulty deeds that could affect ownership of property, many of which would not be disclosed by even the most thorough title search, and all of which would likely be covered by an owner's title insurance policy:

• Forged Deeds, Deeds of Trust, Mortgages, Satisfactions or Releases.
• Deed by person who is insane or mentally incompetent.
• Deed by minor (may be disavowed).
• Deed from corporation, unauthorized under corporate bylaws or given under falsified corporate resolution.
• Deed from partnership, unauthorized under partnership agreement.
• Deed from purported trustee, unauthorized under trust agreement.
• Deed to or from a “corporation” before incorporation, or after loss of corporate charter.
• Deed from a legal nonentity (styled, for example, as church, charity or club).
• Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized or defective under foreign laws.
• Claims resulting from use of “alias” or fictitious names by a predecessor in title.
• Deed challenged as being given under fraud, undue influence or duress.
• Deed following nonjudicial foreclosure, where required procedures were not followed.
• Deed affecting land in judicial proceedings (bankruptcy, receivership, probate, conservatorship, dissolution of marriage).
• Deed following judicial proceedings, subject to appeal or further court order.
• Deed following judicial proceedings, where all necessary parties were not joined.
• Lack of jurisdiction over persons or property in judicial proceedings.
• Deed signed by mistake (grantor did not know what was signed).
• Deed executed under falsified power of attorney.
• Deed executed under expired power of attorney (death, disability or insanity of principal).
• Deed apparently valid, but actually delivered after death of grantor or grantee, or without consent of grantor.
• Deed affecting property purported to be separate property of grantor, which is in fact community or jointly owned property.
• Undisclosed divorce of one who conveys as sole heir of a deceased former spouse.

If you are a buyer, do you want to take this risk? If an agent, do you want to allow your buyer to close without an owner's policy? Or, worse, recommend against one? An owner's title insurance policy requires a one-time premium payment which is in most cases a very small percentage of overall closing costs. Little cost, big peace of mind.

[Source: List of faulty deeds provided by First American Title Insurance Company, of which Mid-Atlantic Settlement Services is an issuing agent.]