Friday, March 20, 2015

Why Challenge Exceptions on Title Insurance Owner's Policy?

Can you imagine purchasing auto insurance where the policy has an exception page that looks something like this.

  1. excludes collision
  2. excludes vandalism
  3. excludes hail
  4. excludes theft
If you saw this, wouldn't you wonder the point of having auto insurance?  Then keep reading...

Let me ask you this, have you ever looked at the Title Insurance Owners Policy sent to your Realtor prior to closing?  If not, you may be getting a policy that excludes coverage on major "risks" homeowners face each day.

For example, I was reviewing the policy for clients who are going to be closing next month, and I was surprised to see these exceptions on the property they are purchasing. 

 1. Defects, liens, encumbrances, adverse claims or other matters, if any created, first appearing in the Public Records or attaching subsequent to the Effective Date but prior to the date the proposed Insured acquires for value of record the estate or interest or mortgage thereon covered by this Commitment.

2. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term "encroachment" includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments on the Land of existing improvements located on adjoining land.

3. Rights or claims of parties in possession.

4. Construction, Mechanic's, Contractors' or Materialmen's lien claims, if any, where no notice thereof appears of record.

5. Easements or claims of easements not shown by the public records.

6. General or special taxes and assessments required to be paid in the year 2015 and subsequent years.

I challenged these 6 on behalf of my clients because we, as homeowners, want insurance coverage against these things, we certainly don't need them listed as exceptions to the owner's policy.  

Even if you (and or partner) find all of this extremely boring, please get a friend or family member to review some of this stuff!  Buying a house is a big deal, don't approach it like it's not.