There are so many things to think about when making a move, such as connecting utilities, coordinating possession of your new home, setting up cleaning, movers, and starting to get settled in at your new address. The closing date finally arrives, you meet your title closer who presents you with a sizable stack of documents for you to sign and then the purchase of your new home is complete. You get the keys and you are IN!!

Of all the items on a closing worksheet, the fees and services of the title insurance company are sometimes the most misunderstood fees by the buyer. What many do understand is the importance of the abstract for the property, and that the abstract had to be updated. In fact, you may still receive an abstract to the property which describes in great detail how the ownership of that real property has transferred to the previous owners over time.  The abstract proves assurance that the seller did own the property and thereby did have the right to sell that property to you. The transaction is then recorded at the county…known as recording of deed. But the deed, in fact, only says you were the last person to record the deed and that you had rightfully purchased that property hence you are the owner, right?  Well that deed says you are the owner.

One of my buyers purchased a home in 2009 and certainly thought everything was fine.  They had moved into their new home, had been making the payments.  Just as they were coming up on the first anniversary in the home….they were visited by a man working for a lender advising them that their home had been FORECLOSED on and they needed to START MOVING!! The asset management company that was hired by the bank foreclosing on the home had assigned a Realtor to pre-list the home and prepare the home to be listed on the market for sale. The Realtor noticed on the MLS that I had SOLD that home just last year, and luckily he also knows me, Dan Vigdal.

So I got the call from the Realtor explaining to me that he had made a visit to the property and had knocked on the door.  Needless to say, the exchange with the owner (my buyer) did not go the way he had expected. He was just calling me to let me know he is just doing his job as assigned by the investor.  I suggested I call the owner and let them know that he was “just doing what the investor had instructed him to do and asking if I could please advise them that voluntarily moving before the Sheriff’s Department arrived with an eviction notice would be a wise thing for them.”

I immediately opened up the county website and did a search for foreclosure sales by address. SURE ENOUGH!! That address had been advertised and SOLD at Sheriff’s sale in October 2009!! However, the borrower name on the foreclosure was an unknown person and I did not recognize that name. This was very interesting. So thinking that there was just a simple mistake made on the Sheriff’s records, I called the Sheriff’s Dept. and they confirmed that in fact the address was NOT a mistake and they couldn’t comment on the name of the borrower.

So, what could have possibly happened?? I really had a wonderful time with that buyer, and had a lot of respect for them. They had a great job, and were very careful to not overbuy and make themselves “house poor”…everything was very comfortable. This didn’t make sense.  Just how do you call someone in such a position and say, “so I understand your home is in foreclosure and you need to get packed before you get evicted.” I just could not think of any gentle way to ask the question, and it did break my heart to think of this nice family that maybe had fallen on hard times. But there still was the possibility of some mistake.  After all, the borrower of record in foreclosure was an unknown name.

You can imagine what I heard from my client when I did make that call. “Whatever are YOU talking about?” “My home has been sold by the Sheriff sale?” “Of course we have been making the payments, do you want to see the payment history?” After the initial shock wore off, my client did inform me that there had been a couple of visits to their home, but that they thought it was just a mistaken address as well.  After all, they had no idea who the person named in these visits (the “unknown borrower) was, so it must be some mistake!

OMG, WHAT DO WE DO?? The Sheriff’s Dept is working on an eviction notice, and of course everyone is following the appropriately executed county procedures and documents concerning this foreclosure sale that had taken place in October 2009. It is now April 2010 and the sixth month redemption period has ticked away. My client had no idea any of this had taken place – until now.

Without a lot of time to waste now, I instructed my client to dig out that stack of papers…you know, the ones that were given to them at closing? I reminded them that I always advised, if not insisted, that they purchase the owner’s title insurance policy in addition to the required lender’s title insurance policy. At this moment, this was proving to be very very good advise. With an owner’s policy, the owner has the right to make a claim to the title insurer to protect their rights and equity in the home if there is a subsequent claim made against the title. This “foreclosure” was definitely a claim against the title which that insurance company had underwritten prior to the closing of my client’s property.

I will tell you the ending of this story in just a minute.  First, I want to make this distinction of owner’s policy and lender’s policy. Had my buyer not purchased the owner’s policy, they would not have any claim to make with the title insurance company. They would more than likely not received any help on their behalf because they would not have been an insured in this case. If they had not received an immediate assistance from the title insurance company, the Sheriff may have proceeded with the eviction unaware of the mistake in paperwork years before. The lender would have been protected, and eventually they would have filed the claim to protect the property, but that could have been weeks or months later.  In the meantime, my client would have had to move from their home.

Alright back to my client, after doing some digging, they came up with that stack of paperwork which, honestly, most people never think they will have to look at it again after closing. I asked them to go through that file and find the Owner’s Title Policy, call issuer of that policy and explain to them what was happening, and ask them what they can do to stop this process immediately.

At this point, there is some vindication that I am absolutely correct. When they called the title insurer and explained what was happening, the insurance company did immediately take the claim and began the process to stop the foreclosure action. They called the County Sheriff’s Dept and were successful in getting them to stop the eviction process.

After several days of searching the title insurance company found that somewhere in the past, and long before my clients every arrived at the property, there was a court action concerning the “unknown borrower” that was registered on the Sheriff’s sale. That person had evidently filed bankruptcy, and the loan on the property had not been correctly released. The investor who had that loan had since failed, and the investor who purchased the loan portfolio legitimately thought they had a claim to the collect on that loan and ultimately a claim to the property. They had filed the foreclosure action, and it proceeded without my client ever realizing that was taking place. The title insurance company did their job, and provided the protection that they had promised my buyer and…the rightful owner of the property!

I realize this is a long article. These issues can be complicated and, as you see, can involve legal action. I wanted to share this story with you, because we seldom hear the actual use of and absolute value of title insurance. When selling Eagan Real Estate and home is the surrounding areas, I often advise my clients to use a very reputable title company. This is just one of the reasons I work closely with, and highly recommend the services of our local title company, Trademark Title Services. In addition to top quality services, accurate documentation and timely closing services, they do have excellent title insurance coverage that should give you peace of mind.

Just think, you could have heard about my client and their problems with a mistaken identity eviction. It would have been an interesting dig for a news correspondent…”family mistakenly evicted after home sold in Sheriff’s sale in foreclosure.” But the reason you didn’t hear about it on the 6 o’clock news is that the title insurance company was there when this family needed them.

I just love happy endings! Don’t you?

Buy the Owner’s Title Policy from a reputable Title Company!  It IS worth it and I have a buyer that will back that up!

Tags: eagan area homes, Eagan Real Estate, Owners Title Policy, Title Insurance