As if acquiring property wasn’t already a mammoth undertaking, a new form of fraud has emerged, known as title theft. Culprits resort to fabricated documentations that claim ownership over properties that rightfully belong to other individuals. Unfortunately, the legitimate owners are typically awoken from their blissful ignorance when they decide to sell the property, and the deceitful claims cause distress and complications for both the buyer and the seller.
Title theft occurs when scammers forge deeds and other ownership documents and file them with the local county clerk. They may then attempt to sell the property, rent it out, leverage it as collateral to acquire loans or even move into the house. While this form of fraud is currently less prevalent compared to other types of identity theft, real estate experts have observed a worrying uptick in these cases.
The experts recommend a few precautionary measures. The first is to ensure you know whom you're dealing with. Enquire about the seller from your real estate agent. If the seller is a long-term resident and an active community member, the chances of dubiousness are significantly lower. Secondly, insist on an in-person closing, a method promoted by the National Association of Realtors.
If you intend to finance your property with a mortgage, your lender will necessitate a title search. This process confirms that the property is owned outright by the seller. Additionally, you will be obliged to purchase the lender's title insurance, also known as loan title insurance. This insurance protects the lender from any financial liability if a forgery or any handicap such as unpaid taxes or liens is overlooked during the title search.
There is also a second type of title insurance, known as the owner’s title insurance that you can purchase for personal protection. Owner's title insurance extends the protection to include the owner's equity in the property on top of the lender's coverage.
While purchasing an owner’s title insurance is optional, adopting such a measure may be beneficial and worth considering. In some cases, sellers will cover the cost as part of the transaction. Nonetheless, a hiccup in your property’s title can lead to closing delays and other inconveniences such as rescheduling your move. Hence, it’s best to secure this as early as possible to deter those title pirates and enjoy a smooth home-buying process.