HomeA Homebuyer's Worst Nightmare
A Lesson in Title Insurance
by Russell Kavanaugh
A slight October chill was in the air that floatedthrough the bedroom window, caressing the lace curtain as it wove its waythrough the fabric. The first rays of light that broke through the treetopsdanced and flickered across the bedroom ceiling. For each of her thirtyseven years Rachael welcomed the first signs of fall with relish, like anold friend returning. This year she just felt cold to her bones. She lookedat Pete, her husband of thirteen years.
Her eyes slowly scanned the bedroom, a view thatpreviously filled her with happy memories as her gaze passed from item toitem. She remembered the laughter as she and Pete turned an afternoon ofwallpapering to slapstick, chasing each other around the room with widebrushes laden with paste. She remembered his happiness at sanding the hardwoodfloor, and how he had saved over $400 by doing it himself. She was proudof him, as a parent would be when a child brings them a breakfast of burnedtoast and cold coffee, and she loved him all the more.
But now these memories brought no joy-only bitterness.For a full year now the house had been her joy, her protector and her securityblanket. Now it assumed the mantle of the enemy, her foe.
She thought back to the day they closed on thehouse. The day that saw the long and arduous road to financial stabilityfinally come to fruition. This was not their first house. It was meant tobe their last, their dream home. Through prudent management of their fundsand doing without the little extras for the past ten years they had managedto almost pay off the mortgage on their first house. They beamed with pridewhen they were able to put down almost 50% of the closing price on this,the home of their dreams. The selling couple was there: Mr. and Mrs. DennisForest. They were leaving the area-moving to Florida, Lilly told her. Lillywished her well in the house, told her to take good care of it, and assuredRachael that she knew she would have many happy years there.
What a liar, whatever her real name was. How couldanyone be so cold, so calculating and so dishonest. She remembered the dayshe met the real Lilly Forest. That day her world fell apart.
Dennis and the woman who called herself Lilly (hisnew girl friend-an actress, perhaps?) were long gone. They vanished withouta trace, but with their money. Following a bitter separation, Dennis knewhe could not get Lilly's signature to sell the house. So he concocted ascheme, getting some woman to pose as Lilly and sign her name. And it worked.The closing was a scam. How could the closing attorneys not have known?How could the bank have let them do this? Somebody must be responsible.She called her closing attorney. He reminded her of a conversation theyhad prior to the closing: "...But Rachael, I asked you if you wantedtitle insurance and you said no." She felt her world collapse. Shedid remember. She remembered saying no. She remembered talking to her sister,who explained to her that title insurance was just a money making scheme.She remembered believing her. She remembered how clever she felt when shetold her attorney that she did not require title insurance. She called herbank. They always require title insurance on their 50% first mortgage, sotheir position was secure. The bank was safe, but Rachael and Pete's ordealwas just beginning.
It was only a matter of time before a letter arrivedfrom the real Lilly's attorney announcing a lawsuit. Rachael cried at therealization that they had no money to defend a lawsuit, since all that theyowned went into the house. The plans they had formulated late into the nightfor the children, about how they would have enough equity to send the kidsto college when the time came, were fading away. In her mind's eye Rachaelsaw her hopes and dreams crumble like a house of cards caught by a suddenwind.
Rachael was snapped from her nightmarish daydreamby a sudden gust of cold through the bedroom window. Today was the firstday of the rest of her life, but now the glass looked half empty, not halffull.
This story is fiction. There is no Pete and Rachael.Unfortunately, however, there are many who have suffered their nightmare.If you ask the average persion what title insurance covers, they may respondthat it covers you if your property is partly on someone else's property,but usually they are not that sure. The sad fact is that there are a numberof ways ownership of property may be in jeopardy. All too frequently homeowners attempt to cut closing costs by foregoing the coverage that titleinsurance provides. Perhaps the human race is optimistic by nature, neverbelieving that any ill will befall us. Mortgage lenders always require titleinsurance. They are realists. They know bad things happen to good people.
Russell Kavanaugh is a Retirement Plan MarketingConsultant with John Hancock Mutual Funds. He is married to Bernadette Kavanaugh,an Assistant Vice-President with Lawyers Title Insurance Company.