We cannot stress enough how IMPORTANT and VALUABLE a policy of title insurance is for any and all deeded property where title insurance is available. Please note that if you do not pay for title insurance, a title SEARCH will not be conducted. Even if you obtain a PRELIMINARY title report or lot book report, that is not a guarantee about the true condition of title. If the chain of title is challenged after Buyer is recorded as owner of record, Buyer is entitled to a refund of their FULL purchase price.
All parties are checked for liens against them individually, which although not attached to the property, could cause a cloud on title. You can purchase a timeshare without title insurance. However, you will have a difficult time obtaining title insurance for your Buyer if they insist upon it should you later re-sell your ownership.
If there does turn out to be a cloud on title from the previous owner (i.e. a mortgage which was paid off but never released, or delinquent taxes), you will have to chase after the previous owner (or his ex-wife, or lender) for required Affidavits, which may or may not be obtainable. Most policies of title insurance cost $250.00 – $300.00, a worthwhile investment.
We have seen some cloudy title issued resolved during escrow that would not have come to light if a title company wasnÌt involved. For example, one of our Sellers stated that his taxes were paid in full, since the property taxes were included in the annual maintenance fee payment. When our resort verification came back that taxes were in fact NOT included, we ordered a title search. The California tax collector offices does not forward their bills if you move; they make it your responsibility to provide them with your change of address. Therefore, although this owner had not received a bill, he owed close to $1,000.00 in back taxes, penalties, and interest, although his annual tax bill was only $30.00.
Another scenario is when an ex-spouse has quitclaimed off of the property, but an improper deed was recorded, or no deed at all. Many times, an owner will think that because they have a divorce decree stating that they are now the sole owner of the property, they can execute a deed without the ex-spouse’s signature. A properly formatted recorded deed as required by the state the property is located in is the only way to acquire sole ownership through a divorce.
The death of a vested owner also requires handling during the escrow process. An Affidavit of Death must be prepared, signed by the surviving spouse, and recorded along with an ORIGINAL or County-Certified copy of Death Certificate.
Another problem we have seen in about 10% of our transactions is Deeds of Trust or Mortgages that encumber the property, which secure a loan. This old loan has usually long since been paid off by a previous owner, but is still showing up as a lien of record against the property. Many owners think they have clear title simply because they paid off their loan in full. In a perfect world, this would be the case. However, many lenders do not prepare, issue and record a reconveyance until the borrower (our Seller) sends them a written request, and pays fees of up to $500.00 to do so. Even then, the removal is seldom done in a timely manner.
Some resorts, such as Fairfield and Jockey Club, do not even issue a deed until the loan is paid in full. If you own Jockey Club, check to be sure you have a Grant, Bargain, Sale Deed signed and notarized, and recorded in Clark County, Nevada. If what you have is a Certificate for Deed, you are not yet a deeded owner, and the process can take 90-120 days,
with fees averaging $300.00. Although this process causes a delay in closing, we can take care of it as part of our transaction for no additional fee.
IN SUMMARY, TITLE INSURANCE IS HIGHLY RECOMMENDED, IF YOU DO NOT WANT TO GAMBLE TO SEE IF YOU ARE ONE OF THE 10% THAT EXPERIENCE THESE PROBLEMS.