Title Insurance Is an Essential Part of Any Sale

In my June 17th column (which is archived at JimSmithColumns.com), I wrote about “title lock” insurance, which is being widely advertised. The headline for that column said it all: “Don’t Fall for ‘Title Lock’ Services. They Are a Waste of Money and Don’t Provide Much Protection.” Unfortunately, some readers thought I was referring to title insurance and asked me if it was really necessary.

Yes, any purchase or sale of real estate should include the purchase of an “owner’s title policy,” typically paid for by the seller. This policy in unlike other insurance policies, in that it is a one-time premium issued by a title insurance underwriter and sold either directly by the underwriter or by a title agency. It insures the buyer of the real estate against any liens against the property recorded with the county clerk and recorder.

If the purchase is being financed by a lender, that lender will require a “piggy-back” lender’s policy (paid by the buyer) from the same underwriter covering the lender against such claims up to the amount of the loan. (The owner’s policy covers the buyer up to the full purchase price.)  Title insurance should provide all the protection a buyer needs.

I also recommend requesting a credit freeze from the three credit bureaus. It costs nothing, and it prevents anyone from taking out a loan in your name and disappearing with the proceeds.

Every year you should get a notification of value from your county assessor. If you didn’t get one this year, you can look up your address on the county assessor’s website to make sure your home is still in your name.

In Jefferson County, you can visit http://assessor.jeffco.us. Use Google to find other county assessor sites.

Don’t Fall for ‘Title Lock’ Services. They Are a Waste of Money and Don’t Provide Much Protection.

Perhaps you have seen advertisements or received a solicitation to purchase “title lock” service. A reader asked me to find out if it was a scam, so I asked my friends at First Integrity Title to check it out. Here’s what I learned.

The premise of the service is that the company monitors your public property information. It is supposed to alert you to changes to your home title (similar to credit monitoring) but is not as helpful or as necessary.

The truth is that it really isn’t as easy to steal your home’s title as they claim. Also, this is a monitoring service only. There is no “insurance” or help if your title is found to have changed, although Home Title Lock’s website does claim to provide a million dollars towards legal fees and costs to defend title from one of these scams. Doing so wouldn’t be terribly risky for the company, since the fraud is so rare and so easy to repair legally.

The reason a scammer would pretend to own your home is to take out a loan against it, pocket the money and disappear. The best target for such fraud would be a home that is owned free and clear. Any lender would require the purchase of title insurance, so if the scammer were successful in fooling a title company to insure that loan, it would be the title company at risk, not you.

Jerry Spaeth, a lawyer and the CEO of First Integrity Title, reported that in 22 years of doing title work, he has never seen a case where someone has been able to “steal” tile and then take out a loan, as they claim. And for only $15 a month, which such services typically charge, it would be difficult to be anything more than a monitoring service. 

It is difficult to find out how many such frauds have been committed, because they would be lumped together statistically with wire fraud and identity theft. 

The likelihood of needing this service is greater if you have several properties that you own, or if you own your home free and clear — and if you are elderly. The victim might not be able to receive the letters from the new mortgage company that a payment is late.

Again, you aren’t going to be getting support from most title lock services. They are just letting you know if something has taken place.

The title policy you received when you purchased your home does not provide protection for a fraud incident after the purchase of the policy. You can, however, monitor your property on assessment websites to verify that you are still the rightful owner.  Every year you should be receiving valuation and tax notices from your county assessor and treasurer. If you don’t get such notices, contact the county to find out why.

If you have a credit monitoring service, as Rita and I do, you would be notified if a new loan is taken out in your name, and a no-cost “credit freeze” with the three credit bureaus would stymie anyone seeking to obtain credit in your name. 

In conclusion, title lock service is not necessarily a scam, but it is questionable how useful the service is if there is little or no protection that comes with it.

Remember that Google is your friend. I found some useful information by Googling “title lock protection,” including a September 2020 piece from Fox 5 Atlanta calling title lock service a “Waste of Your Money.”