JUST
LIKE PEOPLE DO, SITES HAVE HISTORIES, BOTH GOOD AND BAD |
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You buy a house from a couple
claiming to be husband and wife. |
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One of the two is legally
married to someone else. The estranged husband (or wife) didn't approve the
sale and has an ownership interest in the brick ranch you just brought. |
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Or a missing heir, believed
long dead, shows up with a valid claim against your property. |
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In another case, you take an
extended vacation. A huckster notices the vacant house, goes to the county
courthouse, forges a deed with signatures of the absent owners,
"sells" the house to herself, resells it and pockets the money. |
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You come home from overseas and
find another family living in your house. The operator has skipped town. |
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"It happens, and it
happens here in Virginia - very crafty people have perpetrated fraud,"
said Jon Tracy, president of Virginia Title Co., one of the oldest title
agencies and real estate closing services firms in the Richmond area. The firm,
off Broad Street near Libbie Place, opened a second office this month near
Chesterfield Towne Center. |
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"People have lost their
homes, or the claims are significant enough that they had the potential to lose
their homes." |
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In all three cases, title
insurance would have provided financial protection to protect their investments
and settle claims. |
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The insurance protects
homeowners for as long as they or their heirs have an interest in the property.
Legal costs to defend the title are covered as well. |
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Title companies search public
records for unpaid taxes or mortgages, judgments against previous owners and
easements. Problems are fixed before the insurance is issued; homeowners are
often unaware of corrective actions. |
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Occasionally, hidden problems -
such as forgery, fraud and missing heirs - surface after a closing. Owner's
insurance offers protection by providing negotiation with third parties and
payment of claims and legal fees to defend the title. |
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Two types of title insurance
are issued: one protecting the owner, the other protecting the lender. |
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Lenders almost always require
title insurance. Owner's title insurance is optional, though nearly all home
buyers purchase it. |
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"Homeowners would be
taking a big gamble in not getting title insurance," said Lisa Noon,
communications director for the Virginia Association of Realtors. "In
Virginia, we have a lot of properties that go back a long, long way, so it's
even more important to be sure the title is clear." |
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Problems arise in one out of
every four real estate transactions, according to the American Land Title
Association, a national trade association in Washington. |
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"The truth is claims do
happen more frequently than people think," said James R. Maher, executive
vice president of the association. |
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The title-insurance industry
paid $582.7 million in claims in 2002, up from $465.1 million the year before. |
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Rates are based on sales or
assessed real estate values. A $150,000 home in Richmond would equate to about
$600 for both lender's and owner's policies, Tracy said. The homeowner pays for
the policies. |
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Owner's title insurance is a
one-time cost. The policy bought at the first closing is good for as long as
the house is owned by that person. |
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But lenders, even in a
refinance with the same lender, require new policies - and homeowners pay for
them. Policy discounts are often available on refinances. |
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"All sorts of things can
happen, even if it's only been five months [between refinancings]," said
Lorri Ragan, association spokeswoman. Liens could be placed on a house for
nonpayment of child support or alimony, for example, or by a contractor who
wasn't paid for an addition. |
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Property and casualty insurance
is forward-looking, dependent on future occurrences such as storm or flood
damage. Title insurance looks at the past. |
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"The interesting thing
about real estate is it's dealing with new people every day," Tracy said.
"People often have a long history of things they have done, both good and
bad. Property is like that, too." |
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Bad-credit histories
will show up in land records, since creditors often place liens on properties,
he said. "History is following people. A piece of land has history. That's
what I find interesting." |
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Some Virginia properties can be
traced to land granted by a king of England or even further back, he said.
"If descendants of an Indian tribe come back and say, 'This land was taken
from us,' that's a title issue." |
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Although a house may be new,
the land under it is old. Title insurance protects claims against the whole
property, Tracy said. |
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Virginia Title Co. was started
in 1981 as an insurance agency and real estate closing services firm. |
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Tracy, a settlement and
insurance agent, came into the business in 1985 after working in the
development office of his alma mater, the University of Richmond. He bought the
business from a friend in 1987 and has run it since. |
As a settlement agent, he
handles real estate closings. Closings in eastern U.S. states are done by
attorneys and settlement agents, but elsewhere in the country are handled
mostly by settlement agents.
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