By Lydia Blair
When it comes to title insurance policies, there are no hand-me-downs. No recycling. There are no “slightly used” policies available. It doesn’t matter if a property has been owned a year, a month or a week. When a property is sold from one person to the next, a brand-new title insurance policy is issued. Every time.
One might think it’s an unnecessary task and expense when a home may be changing hands after only a year or so of ownership. Why get a new a new title insurance policy when a title search was done so recently?
Because a homeowner or builder could do many things to encumber the title in a short time. There are an amazing number of possibilities. Some are unsavory, most are unlikely, but all are still possible.
A lien or judgment could be filed against the property owner in the short amount of time they have owned it. Nothing brings out the debt collectors like the purchase of a property. Delinquent child support debts can invite a lien against a property faster than you can say abstract of judgment. An unpaid ex-spouse can get to the courthouse with their judgment quicker than you may think.
How would you like to discover that the newly remodeled home you just bought has an unpaid construction lien and the contractor is now looking for you to pay it? And it could have been discovered with a new title search? We won’t even mention the more unusual encumbrances that can happen during a short ownership. From potential encroachments to marital status changes, you don’t want surprises after the purchase of your property. And you certainly don’t want uninsured surprises.
Prior to purchasing a property, a new and updated title search is needed to reveal any of these kinds of issues and ensure the new owner has clear title. The new owner’s title policy lasts as long as you or your heirs own the land.
A bright note is that if you refinance your property within seven years of purchase, you receive a discount on the new title insurance policy. The discount varies, based on the number of years since you originally purchased the property. If it is in the first year since purchasing the property, you get a 40% discount on the title policy premium. It drops down to 15% if you are in the seven-year window. After seven years, the title insurance premium is full price.
Regardless of how long someone has owned a property, when you are buying it, you should want and obtain a new and complete title search and the title insurance to back it up.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.