When you buy real estate in Northern VA, you don't only buy the land, the house, the condo, and any other physical structures. You must understand that you are also buying the legal rights of ownership to the property, which is referred to as “title.”
This title is laid out in the “deed” — an official record of your rights and ownership of the property and identifies the title has been legally transferred to you by the previous owner. This is recorded with the municipality the property is located. When you sell your home in the future, you will also transfer these rights to the next buyer.
Before officially taking this title and completing the closing of the real estate transaction, a title search will be needed, to find any defects in the title. Chances are, there could be one or more issues that could emerge in the title. These are called title defects and they could cause you to lose your property, or make it impossible for you to sell in the future.
Let’s take one example: The year 2011 the homeowner, Mr Smith, at 123 Main St passed away. Mr Smith had a will leaving the property to the son, and the son immediately sold the home. Now, years later the current owners of this beautifully home at 123 Main St have just listed the home and you purchase the property. Once you go to settlement it’s time to move in and start your new life in Northern VA. A few years later, you receive a letter in the mail from an attorney stating that you are not the rightful owner of the home. The person claiming this is Mr Smiths long lost Daughter who never agreed to sell the home. Now What?
Title insurance offers protection against any defects with the title or legal ownership status of your Northern VA property. It covers financial loss from these problems or from any existing property liens. Title insurance may seem a bit expensive, but it is a one-time payment at settlement. It will cover the homeowner even after the property is sold.
Is the price worth it?
Every property has a history, and any defects in the title could hinder you from enjoying your ownership rights. Especially in Northern VA since many properties have been sold many times over hundreds of years. (Fairfax County holds land records from 1742)
Having title insurance serves as your protection against possible title problems that may surface and could cause property loss or damage. Remember, any competing claim of ownership could seriously jeopardize your financial stake on your biggest investment. Unfortunately, these problems may be discovered even after an initial title search was done on your property as the example of Mr Smiths daughter above.
Title insurance is vital especially in purchasing rural property, since aside from any title claim, it will also advise you if the property has previously been used for non-residential purposes.
In Northern VA, there are generally two types of title insurance coverage: a owner’s title insurance and lender's title insurance policy. Lenders require a buyer to purchase a lender’s policy as part of investor requirements to receive the loan to purchase the property. But this policy will not protect you but covers only the lender, hence its name.
It is the owner’s insurance policy that will protect your ownership in the property — your biggest financial investment — against anyone who has a claim against your home.
Here are the most common title problems in Northern VA that could arise and dispute your rights to ownership:
1. There's more than one seller
When you purchase your home, you may not know that there’s another seller or homeowner, maybe an ex-spouse. This third party may surface with a claim that they actually did not agree to the sale and insist that the single seller had no right to sell the home to you in the first place.
In this situation, a judge might confirm and favor this third party’s claim to the house, which could leave you with a huge financial loss (and no home to live in). Yes, you could completely lose the home. But fortunately, your own insurance policy could cover this loss. Your title insurance will pay for expenses such as attorney’s fees and court costs, while the lender’s insurance policy will pay for court costs incurred by the bank. The sale and your ownership however, will be deemed null and void.
2. Property liens for unpaid contractors, tax, or other debts
Sometimes the former homeowners did not always pay their bills. This is worrisome because even if the debt is not your own, banks or other financing companies can place liens on your property to cover for those unpaid debts.
These property liens can slow down the sale of your home in the future because your title won’t be considered clear until you pay the existing debt. Sometimes, even though a tax search hadn’t tracked down any unpaid taxes on the property, it’s still possible that you would get notified for any of these delinquent Northern VA taxes after closing. It’s also a common issue if the property was foreclosed on or the home was bought in an online foreclosure auction website. This is of particular importance because of the frequency of occurrence during the 2008 subprime collapse.
Fortunately, if you have an owner’s title insurance policy, it will cover for it and will give you documentation that the indicated debts are paid.
3. Survey or boundary disputes
Conflicts concerning the boundaries of your property may arise if, despite several surveys before closing, there are other existing surveys that show different property lines. This may lead to dispute especially when a neighbor or someone will claim ownership to a part of your property.
Let’s say your neighbor happened to put up a fence or a driveway on a portion of your new property right before closing, you can count on your title insurance to settle the dispute. The policy will pay for the cost of any legal efforts to settle the issue out of court and have any of your neighbor’s item removed from it.
4. Public record errors
Homeownership rights may contain simple typo and can lead to devastating title claim problems. These clerical errors in public records and/or courthouse in any Northern VA municipality could affect the deed or survey of your property. And while it isn’t impossible to resolve them, it can take an emotional and financial strain to any homeowner. Your title insurance serves as a cushion for this kind of problem.
5. Missing heirs to the property
Imagine this scenario: the former property owner, Mr Smith, died in 2009. So, the ownership of the home may fall to his heirs or to anyone indicated in his will. However, Mr Smiths long lost daughter was missing at the time of his death, so the state sold the property, together with all of the assets at the request of Mr. Smiths only son.
When you purchase this kind of home, despite assuming the rights as the new owner, Mr. Smiths long lost daughter could come forward and claim ownership of the property. This claim could seriously jeopardize your rights to your Northern VA home, even if it happens years after you bought the property.
Bottom Line
The last thing any homebuyer or homeowner would want are hurdles that will cripple their ability to purchase the home and claim full ownership to it or take the home years down the road.
It may be a slim chance that past owners or unpaid property tax bills might emerge, the risk is still large, considering what is at stake. If you are still contemplating on whether you will allot money for it, just if you’re suddenly faced with any of those title-related nightmares. It’s an investment in your homeownership.
