Purchasing a piece of real estate, be it a family home or retail space, is one of the largest investments you will probably ever make. You think you’re prepared — you stayed within budget, had the property inspected and you took out homeowners’ or business insurance. With so much at stake, though, there’s a lot that can go wrong behind the scenes. Unreleased liens, invalid deeds, missing heirs and incorrect or fraudulent information in public records are just a few problems that stand to jeopardize your investment.
A common misconception is that title insurance only protects you up to the point of closing. In reality, the policy will protect you from any errors that come out of the shadows even after closing. That means if someone claims they have a legal right to your property as an heir years after closing, you and your family are still protected.
Issues can also stem from the escrow process. When setting up an escrow account to pay property taxes, the lender often asks the title agent to estimate the annual property taxes. The lender then uses this information to calculate the mortgage payment. Many people don’t consider it, but new construction plays a huge role in whether an accurate good faith estimate is made. Say a buyer wants to have a house built on a piece of property. If the title agent estimates the tax liability based on the empty lot rather than on the improved value, the escrows will come up short.
Always be sure to ask potential lenders and title agents what fees you will be charged. If the mortgage payment you were promised is jumping substantially due to incorrect tax estimations, you should talk with the title agent that handled the closing and the lender to find out how the error happened. Unfortunately, there’s not much that can be done once the mistake has been made.
Many buyers are so frazzled by the moving process that they aren’t thinking about legal issues, and they shouldn’t be expected to consider such problems. That’s why it’s essential to work with a reliable and experienced title attorney, lender and title agent from the start. Combined with title insurance, an attorney can help you avoid falling into your own title horror story.