By Eric Wert
A recent article in the Philadelphia Inquirer highlights a serious problem some homeowners face after purchasing a property – they don’t own the entire property that they believe they bought.
The article tells the story of a young couple in Delaware County who signed an agreement of sale to sell their first home. With the proceeds of that sale, they hoped to purchase a larger home to accommodate their growing family.
They were forced to significantly delay those plans when, prior to closing on the sale of their first home, the buyer’s title company discovered that the land the sellers believed they owned (and agreed to sell to the buyers) was actually two separate lots. The title search showed that the sellers only actually owned one of the two lots.
The problems caused by this discovery forced them to lose the buyers of their first home and significantly delayed their ability to purchase the new, larger home. In addition, they now face the realization that it may cost thousands of dollars and years of court proceedings to clean up their title problem so that they can finally sell their home and upgrade.
These types of problems are not common. However, they can be incredibly expensive and time-consuming to fix when they occur. To most families, their home is their single largest asset, and any misunderstanding or error in the purchase of that home can be financially and emotionally devastating.
So, what can you do to avoid problems like this?
First, be sure to purchase an owner’s title insurance policy whenever you buy real estate. If you are borrowing funds from a bank to make the purchase, the bank will almost certainly require the purchase of a lender’s policy. The purpose of a lender’s policy is to protect the bank’s investment in your mortgage…not to protect you. You can also purchase an additional owner’s policy to protect your investment for a relatively small expense.
Second, be sure to read and understand the terms of your title insurance policy. Before issuing a title insurance policy, the title company will conduct a thorough review of public records related to the property to find any problems or “clouds” on the title. Before they issue the policy, the title insurance company will demand that any clouds on the title be resolved or list those issues as specific exceptions to coverage.
Often those exceptions listed are relatively standard and inconsequential – like, an easement across the property to the water company to install and maintain a water line to the house. However, suppose the title insurance company finds a significant cloud on the title that can impact your ownership, and you don’t notice it in the list of exceptions to coverage. In that case, the policy doesn’t protect you.
Also, it is essential to realize that a title insurance company does not visit the property or conduct a survey to ensure that what you purchase is the same as what you believe you are purchasing. Therefore, if there is any question as to where the property’s boundaries are, it may be wise to hire a land surveyor to conduct a survey to confirm the boundaries. Again, for a typical suburban property, this can be a relatively small expense compared to the significant investment you are making in purchasing the property itself.
Finally, and most importantly, if you are unsure or uncomfortable with any step in this process, be sure to speak with a real estate attorney. An experienced real estate attorney can help you understand all documents and issues with purchasing your property to be sure that you won’t have unfortunate surprises down the road.
About Eric Wert:
Eric is an attorney with local roots. He was raised in Montgomery County, married his high school sweetheart and now lives, works, and is raising his family right here too.
Eric primarily practices in the areas of Real Estate/Land Use/Zoning, Business Law, Municipal Law, Wills, Trusts, and Estate Planning.
Eric chose to pursue a career in the legal profession out of a desire to help individuals navigate the law as they pursue their business or real estate passions. His clients value his professionalism and extensive knowledge of the local laws.
Please feel free to call me at (215) 362-2474 if you have any questions about purchasing a home. I look forward to talking with you.
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