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A Homebuyer's Worst Nightmare
A Lesson in Title Insurance
by Russell Kavanaugh
A slight October chill was in the air that floated through the bedroom window, caressing the lace curtain as it wove its way through the fabric. The first rays of light that broke through the treetops danced and flickered across the bedroom ceiling. For each of her thirty seven years Rachael welcomed the first signs of fall with relish, like an old friend returning. This year she just felt cold to her bones. She looked at Pete, her husband of thirteen years.
Her eyes slowly scanned the bedroom, a view that previously filled her with happy memories as her gaze passed from item to item. She remembered the laughter as she and Pete turned an afternoon of wallpapering to slapstick, chasing each other around the room with wide brushes laden with paste. She remembered his happiness at sanding the hardwood floor, and how he had saved over $400 by doing it himself. She was proud of him, as a parent would be when a child brings them a breakfast of burned toast 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 security blanket. Now it assumed the mantle of the enemy, her foe.
She thought back to the day they closed on the house. The day that saw the long and arduous road to financial stability finally come to fruition. This was not their first house. It was meant to be their last, their dream home. Through prudent management of their funds and doing without the little extras for the past ten years they had managed to almost pay off the mortgage on their first house. They beamed with pride when 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. Dennis Forest. They were leaving the area-moving to Florida, Lilly told her. Lilly wished her well in the house, told her to take good care of it, and assured Rachael that she knew she would have many happy years there.
What a liar, whatever her real name was. How could anyone be so cold, so calculating and so dishonest. She remembered the day she met the real Lilly Forest. That day her world fell apart.
Dennis and the woman who called herself Lilly (his new girl friend-an actress, perhaps?) were long gone. They vanished without a trace, but with their money. Following a bitter separation, Dennis knew he could not get Lilly's signature to sell the house. So he concocted a scheme, 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 they had prior to the closing: "...But Rachael, I asked you if you wanted title insurance and you said no." She felt her world collapse. She did 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 she told her attorney that she did not require title insurance. She called her bank. They always require title insurance on their 50% first mortgage, so their position was secure. The bank was safe, but Rachael and Pete's ordeal was just beginning.
It was only a matter of time before a letter arrived from the real Lilly's attorney announcing a lawsuit. Rachael cried at the realization that they had no money to defend a lawsuit, since all that they owned went into the house. The plans they had formulated late into the night for the children, about how they would have enough equity to send the kids to college when the time came, were fading away. In her mind's eye Rachael saw her hopes and dreams crumble like a house of cards caught by a sudden wind.
Rachael was snapped from her nightmarish daydream by a sudden gust of cold through the bedroom window. Today was the first day of the rest of her life, but now the glass looked half empty, not half full.
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 respond that 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 number of ways ownership of property may be in jeopardy. All too frequently home owners attempt to cut closing costs by foregoing the coverage that title insurance provides. Perhaps the human race is optimistic by nature, never believing that any ill will befall us. Mortgage lenders always require title insurance. They are realists. They know bad things happen to good people.
Russell Kavanaugh is a Retirement Plan Marketing Consultant with John Hancock Mutual Funds. He is married to Bernadette Kavanaugh, an Assistant Vice-President with Lawyers Title Insurance Company.