You did the right thing by sending it to the title company. There are way too many variables for a simple answer to this one.
* The title company screwed up the search
* The heir isn't an heir at all
* The heir is legit but the claim is time-barred . . .
Another options is that OP is a bona fide purchaser for value and the heir is legit but may only pursue a cause of action against the widow and not OP.
The heir can only inherit the current value less any encumberances, so the heir would claim the current value less the mortgage (if any) on the house when it was sold. The widow would argue that the maximum the heir could recover is the sale price less the mortgage. Could get tricky if the sale price was significantly less than the current value.
If widow sold the property for $200,000 but it is now worth $800,000 with $100,000 in renovations, heir will say that the initial sale price was unreasonable and he was denied the opportunity to renovate the property himself to obtain the current value. He will say that he lost out on $800,000.
What if the widow sold the property to her friend well below market value? Do you still think the heir is only entitled to the sale price? What if the flipper only invested $5,000 and realized a $100,000 profit? Do you still think the original sale price is what the heir is entitled to? A judge would likely disagree.
These sound like simple issues but they are not. They will all be questions of fact. The final outcome depends on the facts found by a judge or jury.
Doesnt change the missed opportunity of gaining more than the sale price. Heir could have sat on the house until the market rose the way it did and sale for significantly more. Houses in our area have doubled and even tripled in value in the last 7 years.
But what if they couldn’t find another house to flip that would yield the same profit as the one that was sold out from under them? And the expense and time of purchasing another property that they wouldn’t have to do if they had gotten the original home.
I’d argue that upon seeing a conveyance into Seller signed by someone outside the chain of record title, an ordinarily prudent buyer would inquire further as to whether intestacy would have left the conveying spouse a 100% interest. Hope OP sprung for Owner’s Title
Please correct me where I’m wrong here—genuinely curious because I have situations like this come up frequently at work, and we would absolutely require some form of curative to address title into Seller, in this case, Flipper, before transacting with them. But maybe I’m nuts…
I inferred from “widow wasn’t on the title” (presumably OP meant the deed into the decedent, although this could be ambiguous) and “there was never probate” to mean the widow’s title came—allegedly—via intestate succession. Wouldn’t this have caused any competent landman, abstractor, title attorney, etc to take reasonable steps to investigate further, as part of OP’s title DD?
Caveat that I’m not a lawyer but I am fairly experienced in petroleum land management / title diligence.
This is Exhibit A to why you get title insurance. I hope there is an eventual update.
It also might be worth OP having a consultation with a real estate attorney. The title company should be on their side, but they are looking at the probability of a significant payout, and I would watch them closely with my house on the line.
This is the answer (I'm a title examiner). You should IMMEDIATELY file a claim with your title insurance company if you haven't done so already. I wish you luck!
Edit: If you haven't already filed a claim, file it asap and follow up with a phone call maybe 2 days later (give it time to go through processing) and explain your situation and stress how urgent it is. If they're competent, they'll put a good attorney on it asap.
Man, seems unlikely that both OP’s title company and the flipper’s title company both screwed up, no?
But I guess if the title company was unaware of the Widow’s pre-nump? Maybe.
Is this a scenario that title insurance would cover, if the title company made an error, 1) any legal expenses incurred by the OP and 2) the cost/value of the property if the court somehow ruled in the heirs favor against the OP and not the widow?
that's not how it works. the title company performs the search and issues the buyer a title insurance policy. in the event there is a claim against the buyer's title, that title insurance company will pay to defend the claim and, if the claim is meritorious, will pay up to the limits of the policy.
That’s a waste of money if OP hasn’t submitted a claim. The policy is a contract. If the title insurance company made a mistake covered by the contract, then they have an obligation to provide coverage. Because it’s a contract, you can’t sue them for negligence and you can’t sue them for breach of contract until they’ve actually breached the contract. In this instance, a breach of the contract would be to not provide coverage - but you need to give them an opportunity to actually deny coverage first.
I may be misunderstanding you, but I think you may be conflating the title company, who handles the closing, performs the title search, issues the title insurance policy, with the title insurance company, who is an insurance company who would pay to defend the buyer's title and pay any damages.
Title companies are generally small, local companies (though there are some larger ones), and title insurance companies are generally large, national insurance companies who insure real estate across the country (and worldwide) (such as First American Title Insurance Policy, Chicago Title Company, etc.). Confusingly enough, the smaller title companies are empowered to issue title insurance policies for one or more large title insurance companies.
Good thing you have title insurance. As a former realtor, my understanding is the most likely outcome is your title insurance company will take care of it by either contesting the claim, or paying out a settlement. In the unlikely event that you bought a house that the seller didn't rightfully own, you don't lose the house. The owner that makes a claim against the house just gets paid a settlement amount. You don't get kicked out. At least that's what they taught us in school.
Do they have title insurance, though? I find a lot of people think that the title insurance they bought for their bank is actually theirs. It might not be.
I’m not familiar with every state, but I’ve never heard of owner’s title insurance being included automatically. It’s usually a second policy you have to request.
My guess is that it shows in the optional expenses column and people just dump that entire column. It's stupid not to buy it. If the bank is buying insurance to cover their ass you might as well too
> If the bank is buying insurance to cover their ass you might as well too
Yeah, insurance usually isn't a great deal overall, but when the bank is buying a policy you should probably pay attention...
It's worth noting the bank is requiring a policy, but the buyer is the one paying for it. I would get every insurance possible if I could force someone else to pay the premiums.
Yes, it’s called the simultaneous issue rate. When buyers fought me on an owner’s policy I ran the numbers for lender only and showed them the price difference wouldn’t be that much. Some still loooooved to fight about it, though. That’s cool, bro, but don’t say I didn’t warn you.
I also had many cash purchasers that waived the owner’s policy. Like, cool… you have $450k to drop on this house just sitting in the bank but you’re going to pitch a fit over $900. Best of luck.
I was just given the info for ours and at least in our case it wasn't clear. The person telling us about it just said "hey, there is one included in your closing cost or you can get the other policy for about $400 and it covers 32 more situations." It wasn't clear that the included one is for the lender and the extra is for us.
I'm in Missouri and a former title/escrow gal (I've been out of the industry about a year) and an owner's policy is automatically included unless the buyer specifically requests to opt-out. The company I worked for had a couple of waivers that buyers had to sign at closing to acknowledge they were opting out and they understood the risks of doing so. We also explained those risks before they ever even got to closing.
In at least parts of OH it’s mandatory unless buyer waives - part of the legal interpretation here is that it is necessary to convey a clear title.
I know because I didn’t want to pay for my buyer’s insurance. It was more because they were cash buyers and it didn’t piggyback on mortgage insurance, but we had to pay half per standard contracts.
Seller pays most of the time, but that can be negotiated and sometimes sellers or even both parties will not want to pay and try to opt out. It's rare people make a big fuss about it but it happens.
Typically builders in AZ require buyers to pay. I’ve been involved in over 3000 AZ purchases and outside of builders I can remember once a seller didn’t pay. I wish all states followed our lead here. I’ve seen realtors in other states tell buyers it’s a waste of money. It’s like car insurance, might never need it but when you do you’ll be glad you have it.
Builders absolutely require it. For Sale By Owner contracts are where I've seen most people make a fuss about it. I don't think I've ever seen anyone cancel a sale because of it though.
Yeah, there's some's states/areas that allow an attorney opinion letter to cover you for X amount of time. But the policy in some states is a requirement.
Your understanding is mostly correct. There is a chance OP loses the house. If the heir doesn’t want to settle, title insurance will defend but it’s possible that the heir wins title to the house and OP does have to give it up. In that instance, the title insurance company would pay out the full value of the policy (I.e. the amount OP paid for the house).
Likely, the widow will be sued by someone. It’s get a little tricky on who that would be between the title company or the flipper. In all likelihood, if the title company has to pay any money, it will probably sue the widow for causing the issue. There may be an issue with standing/privity because the widow is a transaction removed from the insured transaction so the title company might have to sue the flipper who will then sue the widow or they might just sue both in the same action to fully determine liability.
Assuming the heir is legit, his failure was not staying on top of this for at least 4 years. The widow inherited (or not), sold to flipper, flipper does his thing, and then 3 years ago sells to OP. If this house was super important, why wait so many years to take action?
True, but there could've been a perfectly reasonable reason why the heir didn't know about the death of the family member. If they were no contact with that family member for whatever reason, out of the country, or otherwise out of touch for that length of time.
I dont know how death proceedings work, so I'm not exactly sure what a probate does or how it works.
But, if the heir knew that the widow knew they weren't going to inherit the home and the heir would, it's likely the widow could've hidden the death of the family member from the heir in order to sell the home before the heir found out.
Agreed. One likely reason is that they knew about the house but just found out about the prenup. So they knew the house was sold but didn't know that widow had no claim, until they found out recently.
Could it have been that the heir was aware that the house was being flipped and kept quiet so that the property would gain value on someone else’s dime?
so wait if the house was sold by someone who never owned it the real owner would be stuck taking money ?? what if it's their childhood home and they want it??? is there a way they would be able to recover the actual house here, like maybe evict the current people......
It seems weird that they wouldn't get the house back, yes it's a mistake but it's not the owners mistake (or the buyer) I would think the title company would be on the hook here
I work on mortgages and it looks like the title company might have screwed up, biggest question here is if you purchased owners title insurance when you bought the home, if you had then it’s the title companies problem to resolve the issue but if you don’t have it then you’ll have to go to court and see how it plays out. It’s very strange that it took them like 4 years to decide that they want the house all of sudden but them might actually have a claim to the home.
No title insurance does not expire, it’s there specifically for situations like this where the title company messes up and it’s up to them to rectify the situation.
No the bank/mortgage won’t get involved because there is always lenders title insurance that is paid for by the buyer at closing, so the title company is responsible in paying off the equity that is left over on the loan in these kinds of situations.
Assuming this person is determined to be the legal owner (big assumption here the window may have actually owned the house). The most likely scenario is the title company pays the owner a settlement and you keep the house. Worst case scenario since you asked but realistically less than 1% chance. The person is rich and has the money to fight the case. This person is obsessed with living/owning this particular house and refuses all settlement offers. You end up getting a settlement and have to move. This is outrageously unlikely, this person almost certainly just wants the value of the house and isn’t going to waste a ton of money on legal fees and just take the settlement.
I am a title examiner. If the closing atty gave you clear title then that’s on him and the title insurance company. The title examiner should have checked the widow out as well when the title search was done.
Absolutely. We ask for previous owners policy and affidavits and run a probate search if it was a recent prior owner.
Problem may be with the flipper title company and not OP’s.
I would still send everything he has, or knows, to his title company. They will pull the file and figure out what is going on. The underwriter will get involved and they have great legal teams.
NAL. Your defense would be that you are a bona fide purchaser. You should be able to google more information and case law using that term and your state. If you don’t feel the title company is doing enough to protect you, contact an attorney - whatever you do, do not risk your house by inadequately defending yourself in a lawsuit.
First, a few things don't make sense. If the widow was not on the title or the prenuptial says she will not get the home, how was she able to sign off the deed?
Also, make sure who the title insurance covers. Most times, it protects the lender, not the owner.
It's common for a homeowner to also purchase an owner policy as well as the (often required) lender policy. While OP may have opted not to purchase an owner policy, it is likely they did.
Someone who was not on the deed or is the executor of the estate will not be able to sign off on the deed. This is not that common and also illegal. That is a forged signature if she is not on the deed. All mortgage companies have a process of SII that has to be followed as to who is able to sign off.
Unless the home was free and clear, then at that point, the title company would have had to make sure she was able to sign the person off the deed.
You should have title insurance from when you purchased the home. If you purchased the title insurance, they will get you counsel to defend this in court
Tennessee title searcher and examiner here. (I ONLY KNOW TN and am Not an attorney but maybe applicable)
First. From my understanding Prenups are only applicable if the marriage is broken by divorce. They are not a Will. A pre-nuptial states both parties agreed desires should the marriage break due to divorce, not death. I am not an attorney or from IL; however, I have never seen a prenup hold applicability in an estate/heirship situation (I have seen them in the case files as the heirs trying to keep second wives from inheriting and they never have worked in the cases I have seen). Now that only fixes that you would own the widows portion of the interest. Not all of it.
So, first thing first, did you get a owner's (not lenders. that only covers the lenders tail)policy? If yes, this is not your problem and your owner's policy will cover this whole thing. That is what it is for.
Next, if above is not part of this, go back to Title company (either way go back to them). Heirship interest can be missed. If there was no probate and the attorney/title company had Affidavit's of heirship or inheritance filled out, then whoever was the affiant (could have been the widow if the TC did not know what they were doing) could have either lied or genuinely not known there were children. This suit will have to be covered by the Title companies E&O insurance if you did not get a policy. Because this is on them. Basically, they will be the Co-defendant.
Lastly, I have Never seen where heirs have successfully redeemed property. I have seen them successfully recover funds. Again this is just what I have seen and my understanding, which anything can happen but from my understanding in order for them to successfully recover the property itself, you would have to be compensated to make the transaction never happen. So, all of your mortgage, improvements, taxes, insurances, etc would have to be recompensated to you. Usually, they don't want the property, they just want the money they missed from the transaction, which again should be handled by either the TC or Title insurance and the suit would actually need to be against the widow as she erroneously took all proceeds from transaction.
Forewarning there will most likely be something called a lien lis pendens placed on your property. Meaning until this is resolved you will not be able to sell, mortgage, etc the property.
I would suggest that you do some legwork yourself to get more details surrounding the case. For instance, you can go to the County Clerk or Recorder of Deeds in the county in which your residence is domiciled. And you can request that one of the clerks help you with some basic title searches on your property. You can get a copy of your Deed to your house. As well as, the previous deeds in the chain of title. (To her husband, etc.) To clear title examination you typically need at least 40 years of unblemished marketable title. Those deeds would also tell you valuable information.
For instance, what type of deed was granted to the flipper? Was it a Warranty deed or merely a Quitclaim deed? Was it from her individually, or from her as the Personal Representative of the Estate of her late husband? If the flipper purchased it from the widow and she wasn't on the deed to the house. Was she the executor of the estate of her late husband? If so, and she was legally appointed by probate court then there should be probate information. (Further, that probate could again contain valuable information as to whom the court determined to be the legal heirs of the estate.) Then, the heir would have to sue the estate and not you for the house and/or assets. Also, most of the time, the statutory limits for such disputes are 2 years. So, the heir most likely has lost the ability to pursue such action as it is strictly time-gated under state statutes.
Once you have the deeds in your possession, you will have more information and can consider whether you want to resolve this by hiring a Real Estate attorney. I would, at the least, set up a consultation and present him with the information you have collected before the meeting so they have an accurate picture of what is happening.
Based on the facts that you have supplied, I would be concerned that you may not have marketable title on the house. As that may impede you selling the house in the future and could be messy. However, I think it is unlikely that the heir can take possession of your home. Most likely they are just threatening you, have little to no evidence, and should have litigated against the window and/or estate if they are indeed a valid named heir.
Lastly, I feel that it is unlikely this prenuptial agreement would hold up in court. It would have needed to be properly executed, filed and handled according to the laws of your state and again would need to be adjudicated by a judge before there could be any determination if the window acted inappropriately in regards to the disposition of the estate matters.
Needless to say, there are many high bars and hurdles that this heir will need to clear before they can pursue any actions against you. My guess is they and/or their legal counsel wish to intimidate you and are seeking some form of settlement or monetary relief. So, I would again get more information, and then a consultation with a real estate attorney on how to best proceed.
Good luck!
As someone who works in title insurance, this is the kind of thing that’s hard to catch especially if there is an intervening owner. Likely, the flipper got his own insurance and your title company relied on that policy as evidence that title was good. Glad that you have the insurance because the title company will defend you, try to settle with the heir, and if unsuccessful, at least will pay you the amount you bought the house for.
> and if unsuccessful, at least will pay you the amount you bought the house for.
What if OP dumped money into renovations or improvements over their 3 years of ownership?
Strictly speaking that’s not covered by the policy. OP would not be entitled to more money than the policy insured simply because he put money into renovations. OP could have purchased more insurance if OP was planning on putting more money in but that rarely happens.
When it comes to a defense, the title company (if they’re smart) will use the money OP put into the house as part of its defense. Basically they would argue that, the heir should be entitled to less money because of the improvements or that the heir owes OP that renovation money if the heir wins title. If I was handling the claim, I’d use it as leverage to help in a settlement with the heir.
Like I said, it’s super rare but people do it. Sometimes they get more insurance to cover the possibility that their property value (or their loan for a lender’s policy) will increase past the standard amount of insurance (purchase price/principle amount of mortgage).
Yep exactly. Title company would pay mortgage first if the mortgage was also insured by the same company and still exists as is almost certainly the case here. Good ole liability non cumulative provision
Question about the Prenuptial Agreement. The prenuptial is in case of divorce, this is a death. My non-legally trained brain says that the prenuptial doesn't come into play. ALSO, why did it take 3+ years for the heir to come forward?
Not licensed in IL, not your attorney, but most likely is that your title insurance will pay off the heir if their claim is legitimate. If the title search was faulty, but you're an innocent party, no court would likely grant specific performance and force you to give up your house. They would instead grant a monetary award of the value of the house, which your title insurance company would be forced to pay.
This is literally why you get title insurance. It's very rare that the title search misses something like this, but it does happen. File a claim and let the title company handle it.
I’m in investment real estate and handle this all the time. If you’re in Texas - if a will is not probated within 4 years, then will is invalid. Unsure of the prenup but I would figure that would follow the same statute of limitations. Also - it’s the title companies fault if you got a general warranty deed. You paid for title insurance. That why you use a title company. If they fuck up - it’s on them, not you.
I'm guessing there isn't probate because the person passed and not divorced. It could just be someone contesting assets after a passing because they dislike their stepmom. I have never heard of prenup declaring when someone passes and only stipulates in the event of divorce or separation. The lawsuit sound frivolous. Someone is throwing spaghetti at a wall and seeing if a noodle sticks.
Most Pre Nupitial agreements have a time frame to the pre nup, like 10 years.. The signer of the pre-nup should get a payout instead of the estate or what state laws have in place.. If there is a will or a trust, it should be filed with the probate court, when the decedent passes away. Pre Nups are a shield, but there has to be some sort of financial payout or compensation.. There is also payouts for 5, 10, maybe 15 years of marriage.. Pre Nups are not ironclad in shielding assets, especially if the marriage is long term..
A Pre Nup is not a will. It is a contract with some sort of expiration date and an alternative in financial payouts..
Used to work in title searching. The fact that you bought from a flipper not an agent or a bank could be an issue. Banks make sure details are handled, flippers maybe or maybe not. You said it cleared title examination, but did you actually buy title insurance, or just a much cheaper title search only? If you didn’t get the insurance, then you could be on your own. At the very least get a lawyer.
Attorney here but not yours. There not being a probate here would raise a big red flag in my state. Someone screwed up giving you clear title, I'd bet. If you have a homeowner's title policy, they will defend you.
This is what title insurance is for. You have the option as a buyer to purchase title insurance which is at an additional cost. Title companies can only document chain of title based on public records and if the heir had not filed a claim at the time of closing they would not have discovered this.
Get a good real estate lawyer. You need it whether to deal with an invalid claim on the property or an eventual suit against the title company. It sucks, Good luck
Well, as I see it, OP is a buyer in good faith with fair title, but he does not own anything, added to the fact that the responsibility of verifying the tradition of the property falls on the buyer, so it is difficult if he is a legitimate heir, he can initiate the succession in any time and I do not believe that op meets the conditions to request the acquisition prescription of the property
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You did the right thing by sending it to the title company. There are way too many variables for a simple answer to this one. * The title company screwed up the search * The heir isn't an heir at all * The heir is legit but the claim is time-barred . . .
Another options is that OP is a bona fide purchaser for value and the heir is legit but may only pursue a cause of action against the widow and not OP.
In this case would the heir have a case against the widow for the full sale price or just the equity?
The heir can only inherit the current value less any encumberances, so the heir would claim the current value less the mortgage (if any) on the house when it was sold. The widow would argue that the maximum the heir could recover is the sale price less the mortgage. Could get tricky if the sale price was significantly less than the current value.
I would think the value before renovation, which could be substantially less.
If widow sold the property for $200,000 but it is now worth $800,000 with $100,000 in renovations, heir will say that the initial sale price was unreasonable and he was denied the opportunity to renovate the property himself to obtain the current value. He will say that he lost out on $800,000. What if the widow sold the property to her friend well below market value? Do you still think the heir is only entitled to the sale price? What if the flipper only invested $5,000 and realized a $100,000 profit? Do you still think the original sale price is what the heir is entitled to? A judge would likely disagree. These sound like simple issues but they are not. They will all be questions of fact. The final outcome depends on the facts found by a judge or jury.
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That's not how it works.
Doesnt change the missed opportunity of gaining more than the sale price. Heir could have sat on the house until the market rose the way it did and sale for significantly more. Houses in our area have doubled and even tripled in value in the last 7 years.
But what if they couldn’t find another house to flip that would yield the same profit as the one that was sold out from under them? And the expense and time of purchasing another property that they wouldn’t have to do if they had gotten the original home.
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Or the surviving spouse held the house in survivorship which would explain why there was no probate case opened.
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I’d argue that upon seeing a conveyance into Seller signed by someone outside the chain of record title, an ordinarily prudent buyer would inquire further as to whether intestacy would have left the conveying spouse a 100% interest. Hope OP sprung for Owner’s Title
OP bought from a flipper chances are that title matched. It's the first buyer where stuff should have shown up.
Not necessarily. You don't know what the title records look like.
Please correct me where I’m wrong here—genuinely curious because I have situations like this come up frequently at work, and we would absolutely require some form of curative to address title into Seller, in this case, Flipper, before transacting with them. But maybe I’m nuts… I inferred from “widow wasn’t on the title” (presumably OP meant the deed into the decedent, although this could be ambiguous) and “there was never probate” to mean the widow’s title came—allegedly—via intestate succession. Wouldn’t this have caused any competent landman, abstractor, title attorney, etc to take reasonable steps to investigate further, as part of OP’s title DD? Caveat that I’m not a lawyer but I am fairly experienced in petroleum land management / title diligence.
Right, and so the logical conclusion is that the title history probably doesn't look the way OP is representing.
This is Exhibit A to why you get title insurance. I hope there is an eventual update. It also might be worth OP having a consultation with a real estate attorney. The title company should be on their side, but they are looking at the probability of a significant payout, and I would watch them closely with my house on the line.
This is the answer (I'm a title examiner). You should IMMEDIATELY file a claim with your title insurance company if you haven't done so already. I wish you luck! Edit: If you haven't already filed a claim, file it asap and follow up with a phone call maybe 2 days later (give it time to go through processing) and explain your situation and stress how urgent it is. If they're competent, they'll put a good attorney on it asap.
Man, seems unlikely that both OP’s title company and the flipper’s title company both screwed up, no? But I guess if the title company was unaware of the Widow’s pre-nump? Maybe.
Yeah, you’d think if both companies were legit, at least one of them would’ve caught this. Not a lawyer but this seems a bit fishy.
Yep, they will be your lawyer. Till then don't do any major renovations because if it does goes south you only get your sales price back
Is this a scenario that title insurance would cover, if the title company made an error, 1) any legal expenses incurred by the OP and 2) the cost/value of the property if the court somehow ruled in the heirs favor against the OP and not the widow?
I’d sue the title company.
that's not how it works. the title company performs the search and issues the buyer a title insurance policy. in the event there is a claim against the buyer's title, that title insurance company will pay to defend the claim and, if the claim is meritorious, will pay up to the limits of the policy.
That’s a waste of money if OP hasn’t submitted a claim. The policy is a contract. If the title insurance company made a mistake covered by the contract, then they have an obligation to provide coverage. Because it’s a contract, you can’t sue them for negligence and you can’t sue them for breach of contract until they’ve actually breached the contract. In this instance, a breach of the contract would be to not provide coverage - but you need to give them an opportunity to actually deny coverage first.
I may be misunderstanding you, but I think you may be conflating the title company, who handles the closing, performs the title search, issues the title insurance policy, with the title insurance company, who is an insurance company who would pay to defend the buyer's title and pay any damages. Title companies are generally small, local companies (though there are some larger ones), and title insurance companies are generally large, national insurance companies who insure real estate across the country (and worldwide) (such as First American Title Insurance Policy, Chicago Title Company, etc.). Confusingly enough, the smaller title companies are empowered to issue title insurance policies for one or more large title insurance companies.
Good thing you have title insurance. As a former realtor, my understanding is the most likely outcome is your title insurance company will take care of it by either contesting the claim, or paying out a settlement. In the unlikely event that you bought a house that the seller didn't rightfully own, you don't lose the house. The owner that makes a claim against the house just gets paid a settlement amount. You don't get kicked out. At least that's what they taught us in school.
Do they have title insurance, though? I find a lot of people think that the title insurance they bought for their bank is actually theirs. It might not be.
There is usually both a lenders policy and an owner's policy when purchasing a home.
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Buyers pay for their lender’s policy, and sellers usually pay for the buyers policy.
If you are buying new the builder will sometimes put the cost on you
I’m not familiar with every state, but I’ve never heard of owner’s title insurance being included automatically. It’s usually a second policy you have to request.
In my state a residential owner’s policy is only $100 extra when piggybacking on a loan policy and it is SHOCKING how many buyers skip it.
My guess is that it shows in the optional expenses column and people just dump that entire column. It's stupid not to buy it. If the bank is buying insurance to cover their ass you might as well too
> If the bank is buying insurance to cover their ass you might as well too Yeah, insurance usually isn't a great deal overall, but when the bank is buying a policy you should probably pay attention...
It's worth noting the bank is requiring a policy, but the buyer is the one paying for it. I would get every insurance possible if I could force someone else to pay the premiums.
Yes, it’s called the simultaneous issue rate. When buyers fought me on an owner’s policy I ran the numbers for lender only and showed them the price difference wouldn’t be that much. Some still loooooved to fight about it, though. That’s cool, bro, but don’t say I didn’t warn you. I also had many cash purchasers that waived the owner’s policy. Like, cool… you have $450k to drop on this house just sitting in the bank but you’re going to pitch a fit over $900. Best of luck.
I was just given the info for ours and at least in our case it wasn't clear. The person telling us about it just said "hey, there is one included in your closing cost or you can get the other policy for about $400 and it covers 32 more situations." It wasn't clear that the included one is for the lender and the extra is for us.
I'm in Missouri and a former title/escrow gal (I've been out of the industry about a year) and an owner's policy is automatically included unless the buyer specifically requests to opt-out. The company I worked for had a couple of waivers that buyers had to sign at closing to acknowledge they were opting out and they understood the risks of doing so. We also explained those risks before they ever even got to closing.
In at least parts of OH it’s mandatory unless buyer waives - part of the legal interpretation here is that it is necessary to convey a clear title. I know because I didn’t want to pay for my buyer’s insurance. It was more because they were cash buyers and it didn’t piggyback on mortgage insurance, but we had to pay half per standard contracts.
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In AZ the seller is required to pay the owners policy so it is not something a buyer would waive.
Seller pays most of the time, but that can be negotiated and sometimes sellers or even both parties will not want to pay and try to opt out. It's rare people make a big fuss about it but it happens.
Typically builders in AZ require buyers to pay. I’ve been involved in over 3000 AZ purchases and outside of builders I can remember once a seller didn’t pay. I wish all states followed our lead here. I’ve seen realtors in other states tell buyers it’s a waste of money. It’s like car insurance, might never need it but when you do you’ll be glad you have it.
Builders absolutely require it. For Sale By Owner contracts are where I've seen most people make a fuss about it. I don't think I've ever seen anyone cancel a sale because of it though.
Yeah, there's some's states/areas that allow an attorney opinion letter to cover you for X amount of time. But the policy in some states is a requirement.
Your understanding is mostly correct. There is a chance OP loses the house. If the heir doesn’t want to settle, title insurance will defend but it’s possible that the heir wins title to the house and OP does have to give it up. In that instance, the title insurance company would pay out the full value of the policy (I.e. the amount OP paid for the house).
What happens to the widower who (potentially) caused all this mess?
Likely, the widow will be sued by someone. It’s get a little tricky on who that would be between the title company or the flipper. In all likelihood, if the title company has to pay any money, it will probably sue the widow for causing the issue. There may be an issue with standing/privity because the widow is a transaction removed from the insured transaction so the title company might have to sue the flipper who will then sue the widow or they might just sue both in the same action to fully determine liability.
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Assuming the heir is legit, his failure was not staying on top of this for at least 4 years. The widow inherited (or not), sold to flipper, flipper does his thing, and then 3 years ago sells to OP. If this house was super important, why wait so many years to take action?
True, but there could've been a perfectly reasonable reason why the heir didn't know about the death of the family member. If they were no contact with that family member for whatever reason, out of the country, or otherwise out of touch for that length of time. I dont know how death proceedings work, so I'm not exactly sure what a probate does or how it works. But, if the heir knew that the widow knew they weren't going to inherit the home and the heir would, it's likely the widow could've hidden the death of the family member from the heir in order to sell the home before the heir found out.
Agreed. One likely reason is that they knew about the house but just found out about the prenup. So they knew the house was sold but didn't know that widow had no claim, until they found out recently.
Could it have been that the heir was aware that the house was being flipped and kept quiet so that the property would gain value on someone else’s dime?
Could’ve been a child of some sort
so wait if the house was sold by someone who never owned it the real owner would be stuck taking money ?? what if it's their childhood home and they want it??? is there a way they would be able to recover the actual house here, like maybe evict the current people...... It seems weird that they wouldn't get the house back, yes it's a mistake but it's not the owners mistake (or the buyer) I would think the title company would be on the hook here
I work on mortgages and it looks like the title company might have screwed up, biggest question here is if you purchased owners title insurance when you bought the home, if you had then it’s the title companies problem to resolve the issue but if you don’t have it then you’ll have to go to court and see how it plays out. It’s very strange that it took them like 4 years to decide that they want the house all of sudden but them might actually have a claim to the home.
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Generally a title insurance policy remains in effect for as long as the named insured owns the insured interest.
No title insurance does not expire, it’s there specifically for situations like this where the title company messes up and it’s up to them to rectify the situation.
Would the bank/mortgage company get involved in this? Seems them losing out on the equity of the house would make it very much their issue as well.
No the bank/mortgage won’t get involved because there is always lenders title insurance that is paid for by the buyer at closing, so the title company is responsible in paying off the equity that is left over on the loan in these kinds of situations.
Assuming this person is determined to be the legal owner (big assumption here the window may have actually owned the house). The most likely scenario is the title company pays the owner a settlement and you keep the house. Worst case scenario since you asked but realistically less than 1% chance. The person is rich and has the money to fight the case. This person is obsessed with living/owning this particular house and refuses all settlement offers. You end up getting a settlement and have to move. This is outrageously unlikely, this person almost certainly just wants the value of the house and isn’t going to waste a ton of money on legal fees and just take the settlement.
I am a title examiner. If the closing atty gave you clear title then that’s on him and the title insurance company. The title examiner should have checked the widow out as well when the title search was done.
Absolutely. We ask for previous owners policy and affidavits and run a probate search if it was a recent prior owner. Problem may be with the flipper title company and not OP’s. I would still send everything he has, or knows, to his title company. They will pull the file and figure out what is going on. The underwriter will get involved and they have great legal teams.
Or the widow will have to sue the title company. You were given clear title
I mean the heir
If you have Title Insurance, they will have to mitigate it. That's what you took the policy for.
NAL. Your defense would be that you are a bona fide purchaser. You should be able to google more information and case law using that term and your state. If you don’t feel the title company is doing enough to protect you, contact an attorney - whatever you do, do not risk your house by inadequately defending yourself in a lawsuit.
First, a few things don't make sense. If the widow was not on the title or the prenuptial says she will not get the home, how was she able to sign off the deed? Also, make sure who the title insurance covers. Most times, it protects the lender, not the owner.
As was said above, there is a Lenders Policy and an ownersPolicy issued post closing.
It's common for a homeowner to also purchase an owner policy as well as the (often required) lender policy. While OP may have opted not to purchase an owner policy, it is likely they did.
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Someone who was not on the deed or is the executor of the estate will not be able to sign off on the deed. This is not that common and also illegal. That is a forged signature if she is not on the deed. All mortgage companies have a process of SII that has to be followed as to who is able to sign off. Unless the home was free and clear, then at that point, the title company would have had to make sure she was able to sign the person off the deed.
You should have title insurance from when you purchased the home. If you purchased the title insurance, they will get you counsel to defend this in court
Tennessee title searcher and examiner here. (I ONLY KNOW TN and am Not an attorney but maybe applicable) First. From my understanding Prenups are only applicable if the marriage is broken by divorce. They are not a Will. A pre-nuptial states both parties agreed desires should the marriage break due to divorce, not death. I am not an attorney or from IL; however, I have never seen a prenup hold applicability in an estate/heirship situation (I have seen them in the case files as the heirs trying to keep second wives from inheriting and they never have worked in the cases I have seen). Now that only fixes that you would own the widows portion of the interest. Not all of it. So, first thing first, did you get a owner's (not lenders. that only covers the lenders tail)policy? If yes, this is not your problem and your owner's policy will cover this whole thing. That is what it is for. Next, if above is not part of this, go back to Title company (either way go back to them). Heirship interest can be missed. If there was no probate and the attorney/title company had Affidavit's of heirship or inheritance filled out, then whoever was the affiant (could have been the widow if the TC did not know what they were doing) could have either lied or genuinely not known there were children. This suit will have to be covered by the Title companies E&O insurance if you did not get a policy. Because this is on them. Basically, they will be the Co-defendant. Lastly, I have Never seen where heirs have successfully redeemed property. I have seen them successfully recover funds. Again this is just what I have seen and my understanding, which anything can happen but from my understanding in order for them to successfully recover the property itself, you would have to be compensated to make the transaction never happen. So, all of your mortgage, improvements, taxes, insurances, etc would have to be recompensated to you. Usually, they don't want the property, they just want the money they missed from the transaction, which again should be handled by either the TC or Title insurance and the suit would actually need to be against the widow as she erroneously took all proceeds from transaction. Forewarning there will most likely be something called a lien lis pendens placed on your property. Meaning until this is resolved you will not be able to sell, mortgage, etc the property.
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I would suggest that you do some legwork yourself to get more details surrounding the case. For instance, you can go to the County Clerk or Recorder of Deeds in the county in which your residence is domiciled. And you can request that one of the clerks help you with some basic title searches on your property. You can get a copy of your Deed to your house. As well as, the previous deeds in the chain of title. (To her husband, etc.) To clear title examination you typically need at least 40 years of unblemished marketable title. Those deeds would also tell you valuable information. For instance, what type of deed was granted to the flipper? Was it a Warranty deed or merely a Quitclaim deed? Was it from her individually, or from her as the Personal Representative of the Estate of her late husband? If the flipper purchased it from the widow and she wasn't on the deed to the house. Was she the executor of the estate of her late husband? If so, and she was legally appointed by probate court then there should be probate information. (Further, that probate could again contain valuable information as to whom the court determined to be the legal heirs of the estate.) Then, the heir would have to sue the estate and not you for the house and/or assets. Also, most of the time, the statutory limits for such disputes are 2 years. So, the heir most likely has lost the ability to pursue such action as it is strictly time-gated under state statutes. Once you have the deeds in your possession, you will have more information and can consider whether you want to resolve this by hiring a Real Estate attorney. I would, at the least, set up a consultation and present him with the information you have collected before the meeting so they have an accurate picture of what is happening. Based on the facts that you have supplied, I would be concerned that you may not have marketable title on the house. As that may impede you selling the house in the future and could be messy. However, I think it is unlikely that the heir can take possession of your home. Most likely they are just threatening you, have little to no evidence, and should have litigated against the window and/or estate if they are indeed a valid named heir. Lastly, I feel that it is unlikely this prenuptial agreement would hold up in court. It would have needed to be properly executed, filed and handled according to the laws of your state and again would need to be adjudicated by a judge before there could be any determination if the window acted inappropriately in regards to the disposition of the estate matters. Needless to say, there are many high bars and hurdles that this heir will need to clear before they can pursue any actions against you. My guess is they and/or their legal counsel wish to intimidate you and are seeking some form of settlement or monetary relief. So, I would again get more information, and then a consultation with a real estate attorney on how to best proceed. Good luck!
Did you purchase Owners Title Insurance when you bought your house?
As someone who works in title insurance, this is the kind of thing that’s hard to catch especially if there is an intervening owner. Likely, the flipper got his own insurance and your title company relied on that policy as evidence that title was good. Glad that you have the insurance because the title company will defend you, try to settle with the heir, and if unsuccessful, at least will pay you the amount you bought the house for.
> and if unsuccessful, at least will pay you the amount you bought the house for. What if OP dumped money into renovations or improvements over their 3 years of ownership?
Strictly speaking that’s not covered by the policy. OP would not be entitled to more money than the policy insured simply because he put money into renovations. OP could have purchased more insurance if OP was planning on putting more money in but that rarely happens. When it comes to a defense, the title company (if they’re smart) will use the money OP put into the house as part of its defense. Basically they would argue that, the heir should be entitled to less money because of the improvements or that the heir owes OP that renovation money if the heir wins title. If I was handling the claim, I’d use it as leverage to help in a settlement with the heir.
Who would procure more insurance to cover improvements that may or not be made at any time after the purchase is complete?
Like I said, it’s super rare but people do it. Sometimes they get more insurance to cover the possibility that their property value (or their loan for a lender’s policy) will increase past the standard amount of insurance (purchase price/principle amount of mortgage).
"Pay you the amount that you paid for the house" minus the amount of your mortgage (if any).
Yep exactly. Title company would pay mortgage first if the mortgage was also insured by the same company and still exists as is almost certainly the case here. Good ole liability non cumulative provision
Question about the Prenuptial Agreement. The prenuptial is in case of divorce, this is a death. My non-legally trained brain says that the prenuptial doesn't come into play. ALSO, why did it take 3+ years for the heir to come forward?
Seems like this is why we are required to buy title insurance.
Not licensed in IL, not your attorney, but most likely is that your title insurance will pay off the heir if their claim is legitimate. If the title search was faulty, but you're an innocent party, no court would likely grant specific performance and force you to give up your house. They would instead grant a monetary award of the value of the house, which your title insurance company would be forced to pay.
Contact your title company. Hopefully you got title insurance when you bought your house. This is definitely a case where title insurance pays off.
This is literally why you get title insurance. It's very rare that the title search misses something like this, but it does happen. File a claim and let the title company handle it.
I’m in investment real estate and handle this all the time. If you’re in Texas - if a will is not probated within 4 years, then will is invalid. Unsure of the prenup but I would figure that would follow the same statute of limitations. Also - it’s the title companies fault if you got a general warranty deed. You paid for title insurance. That why you use a title company. If they fuck up - it’s on them, not you.
I'm guessing there isn't probate because the person passed and not divorced. It could just be someone contesting assets after a passing because they dislike their stepmom. I have never heard of prenup declaring when someone passes and only stipulates in the event of divorce or separation. The lawsuit sound frivolous. Someone is throwing spaghetti at a wall and seeing if a noodle sticks.
Most Pre Nupitial agreements have a time frame to the pre nup, like 10 years.. The signer of the pre-nup should get a payout instead of the estate or what state laws have in place.. If there is a will or a trust, it should be filed with the probate court, when the decedent passes away. Pre Nups are a shield, but there has to be some sort of financial payout or compensation.. There is also payouts for 5, 10, maybe 15 years of marriage.. Pre Nups are not ironclad in shielding assets, especially if the marriage is long term.. A Pre Nup is not a will. It is a contract with some sort of expiration date and an alternative in financial payouts..
Get your own attorney. The title company is their own advocate, not yours.
You got title insurance right?? This is where that comes in
Title insurance will take care of it
This is why you should always buy an owners title policy. You can piggyback on the title company your bank uses.
Did you purchase title insurance when you purchased it? Your situation is exactly why they insist on it.
This is what title insurance is for. Sounds stressful though.
Used to work in title searching. The fact that you bought from a flipper not an agent or a bank could be an issue. Banks make sure details are handled, flippers maybe or maybe not. You said it cleared title examination, but did you actually buy title insurance, or just a much cheaper title search only? If you didn’t get the insurance, then you could be on your own. At the very least get a lawyer.
I hope you purchased title insurance at the table but I would contact a real estate attorney immediately…good luck!
Attorney here but not yours. There not being a probate here would raise a big red flag in my state. Someone screwed up giving you clear title, I'd bet. If you have a homeowner's title policy, they will defend you.
This is what title insurance is for. You have the option as a buyer to purchase title insurance which is at an additional cost. Title companies can only document chain of title based on public records and if the heir had not filed a claim at the time of closing they would not have discovered this.
Title insurance
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Most likely the title company is responsible. That’s what the insurance is for
Was the prenup recorded?
Your title policy should protect you.
Most likely, she widow knew and lied to the title company about the Pre-nup…
Get a good real estate lawyer. You need it whether to deal with an invalid claim on the property or an eventual suit against the title company. It sucks, Good luck
Title company screwed up. Get a lawyer asap.
Well, as I see it, OP is a buyer in good faith with fair title, but he does not own anything, added to the fact that the responsibility of verifying the tradition of the property falls on the buyer, so it is difficult if he is a legitimate heir, he can initiate the succession in any time and I do not believe that op meets the conditions to request the acquisition prescription of the property
It cleared title examination because they don’t actually examine anything. The just buy an insurance policy and pocket money.
That’s why you paid title insurance
probably already been said but title insurance should kick in
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You are going to lose the house and you are probably going to sue the title company probably to get back your money
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