Title Insurance Issues

In a recent transaction I represented a buyer purchasing a Long Beach CA condo.

One of the many components involved in a purchase is Title Insurance. Early on during the escrow process the Title Company will deliver a Preliminary Title Report to the REALTOR® for review and to disburse to the buyer.

The title report will disclose any obstruction to the transfer of clear title from the seller to the buyer. It will show balance of mortgage due, any unpaid taxes, liens, judgements, all which must be cleared prior to the close of escrow in order to transfer clear title. It will also show any easements and anything else that might cloud clear title.

This particular Preliminary Title Report had a paragraph, buried deep in the back of the report in the boilerplate of the contract. I noticed this while I was reviewing the document and was initially so confused by the statement that I had to re-read it 4 or 5 times, run it by a couple of people in my office and call the title officer that I normally use. I could not believe what I was reading, and was convinced that I must be having a half-heimers moment because this just could not be possible!

The basic crux of the paragraph was that the title company would not deliver title insurance on the 2 parking spaces that are deeded to the unit. I can not even begin to describe the potential problems this could cause. The title company was instructed to remove the paragraph or another title company would be used. They did so, and very quickly when challenged.

Understand that the Title Company is "INSURING" clear title to your new home and these 2 parking spaces are deeded to and a part of your new home.

My title officer went on to explain to me that this is a new ploy being used by a few less than reputable title companies in an effort to reduce their liability. Well it seems to me that if they did their job properly and did proper searches to do just that, they would not have to worry about reducing their liability.

He went on to explain that this has already caused a problem for one Long Beach Buyer and REALTOR®. They were fortunate enough to have been able to work the problem out. Apparently the 2 spaces deeded and transferred had been with that particular unit through several owners and the fact that a prior owner had switched spots with another owner in the building had gone undetected (more poor work by other title companies). When searched the problem was resolved by switching the spaces back without harm. Under different circumstances this could have been a huge problem.

So now we are back on track in the transaction (you would think).

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Posted on February 23, 2007 08:46:07 by Laurie.Manny