Does Title Insurance Protect You From Title Theft?

Homeownership represents a significant financial commitment, and ensuring the security of that investment involves understanding various protective measures. Title insurance, a common component of real estate transactions, safeguards property ownership. Another concern for property owners is title theft, a form of real estate fraud where criminals attempt to unlawfully transfer property ownership.

Title Insurance and Title Theft Protection

Standard owner’s title insurance policies do not provide protection against title theft that occurs after the policy has been issued. Title insurance protects against pre-existing defects, liens, or encumbrances on the title that were unknown at the time of purchase. For example, it could cover an undiscovered lien from a previous owner or a forgery in a past deed.

Title theft, in contrast, is a future act of fraud that happens after the property has been acquired and the title insurance policy is in place. It involves criminal activity, such as forging documents to transfer ownership or obtain loans against a property without the owner’s knowledge or consent. While title insurance can cover certain types of fraud or forgeries that occurred before the policy’s effective date, it does not extend to these future criminal acts against your ownership.

Scope of Title Insurance Coverage

Title insurance provides coverage for specific hidden risks and defects that existed before the policy’s effective date. Both owner’s policies and lender’s policies address these historical issues. An owner’s policy protects the homeowner’s equity, while a lender’s policy safeguards the lender’s financial interest in the property.

Examples of covered defects include:

• Errors or omissions in public records, such as incorrect legal descriptions or misfiled documents.
• Forged documents, like deeds or mortgages in the prior chain of title.
• Undisclosed or unreleased liens, such as mechanic’s liens, tax liens, or judgments against previous owners.
• Boundary disputes related to prior surveys or record errors.
• Undiscovered heirs or prior owners who could claim an interest in the property.
• Fraudulent conveyances or transfers that took place before the current owner acquired title.

Safeguarding Your Property Against Title Theft

Homeowners can implement several proactive measures to protect their property. Regularly monitoring property records with the local county recorder or clerk’s office is important. Many counties offer free property fraud alert services that notify property owners of any recorded activity on their property, such as a new deed or mortgage. Signing up for these alerts provides early detection of potential fraudulent filings.

Monitoring credit reports regularly is another preventative measure, as title theft often involves identity theft. Checking credit reports for unfamiliar accounts, inquiries, or unusual activity serves as an early warning sign. These reports are available for free annually from the three major credit bureaus. Protecting personal information, including social security numbers, driver’s licenses, and financial details, is also important, as this data can be used by criminals to impersonate homeowners.

Homeowners should exercise caution with unsolicited offers to buy their home, particularly if these offers involve unusual terms or requests for personal financial information. While some third-party property alert services offer more comprehensive monitoring, they come with a cost. If any suspicious activity is detected related to property records or personal information, contacting a real estate attorney immediately is advisable.