Title insurance claim accepted, now what?

Question

I won't tell the story here because it's still an ongoing matter but I filed a title insurance claim, a title lawyer started investigating the claim and they recently accepted the claim. However, the title lawyers are super non-responsive when it comes to the next steps. Can someone with knowledge in this matter comment on what will they do to straighten out the title? If they cannot straighten out the title, and for example if there is fraud involved on the part of a previous seller, will they essentially give me cash for the insured amount if they cannot give me clear title to the house

Jay Hinrichs · Answer

U are in the    Q

depends on what type of claim  IE title problem  right of way problem ( they missed it being land locked I have had 3 of those over the years)

Fraud or forgery in the chain of title  ( have had a few of those )

Basically its insurance they will assess what went wrong and find the least expensive way to rectify .. this could be doing the work to fix your problem at their cost. Or simply paying out on the policy.

Keep in mind if they pay out on the policy thats all your going to get IE the amount of the policy if you spent other money to rehab etc you will not get that back.. If a wholesaler had a marketing fee on the HUD you will not get that back only the contract amount between you and the seller.

I have had claims for bad chain of title get settled in 90 days or so I have had right of way issues ( one here in Oregon took 5 years) But it was to my benefit the policy was for 140k what I paid for the dirt but I put 100k into it subdividing it and the value was 600k which is what I ended up selling it for. So I just waited for them to deal with state and neighbors on my behalf they hired the attorney who worked it out I bet they spent well over 50k in attorneys fee's over the years but still cheaper than cutting us a check for 140k and leaving us with un salable or insurable property.

As  lender I have been in a few title claims for fraudulent deeds fraudulent re-conveyances and someone popping a mortgage on to our property during the gap insurance recording times.  And of course forgery was the main culpret with many of these.

@Peter Walther  is an expert at claims I am just telling you how mine have gone.

Peter Walther · Answer

I'd need a little more facts to opine on what happens next but Jay covered it pretty well.

Fraud is kind of an ambiguous word.  For example, if a child of an owner convinced a parent to sign a deed telling the parent it was needed it for estate planning purposes, the parent was probably defrauded.  However, if the parent was competent and the Grantee wasn't part of the fraud, didn't know about the fraud and paid proper consideration for the deed, (s)he/it may be a bona fide purchaser and has fee simple title and the parent was the victim of fraud.  However, another child of the parent may have hired an attorney to claim the parent wasn't competent and therefore the deed fails.  If that were the case the title insurer would investigate the circumstances of the sale and decide on coverage and if covered decide whether to pay the covered loss or defend the title.

Now if two siblings owned a parcel and conveyed it to a Grantee and one forged the signature of the other, the Grantee may have good title to 1/2 of the parcel and no title to the other.  The non-signing sibling wasn't defrauded because (s)he didn't lose title, but the Grantee was defrauded as to 1/2 the parcel.  If that were the case the insurer would need to decide, is it better to pay the insured's loss, buy the non-signing sibling's interest and have it conveyed to the insured, see if the non-signing sibling wants to buy the insured's interest at a reasonable price or bring a partition action to have the property sold at auction to mitigate the insured's loss.

With more facts I might be able to provide an informed opinion.

Jay Hinrichs · Answer

In my case I just went through earlier this year.. they simply paid my title claim.. the wholesaler disappeared and the house is in our name but with a buggered up title .. So next step is to quiet the title through the courts. U can always deed the house to someone without title insurance.. U could also just keep it rent it and take the rents  never pay the tax's and let it be sold for tax;s down the road.. and or maybe you bid on it at tax sale that will clean up the title since there is probably no loan your no defrauding a lender. But no I don't believe the insurer has to do anything but pay you.. OR fix the title if they chose to pay you then its your baby. at least that's what we experienced,  and once they assign a loss mitigation person to it we just dripped on them until they paid us.

Allen L. · Answer

Thank you @Jay Hinrichs! My case definitely jives with fraud so I'm not very optimistic about owning the house after clearing the chain of title, I just want my cash back ASAP so I can keep growing. I did buy it from a wholesaler and they have said that they will give back their fee as long as title insurance reimburses for the rest of it.

If it is fraud, do you know if the lawyers will help removing myself as the owner of record? I definitely don't want to be on the hook for paying taxes or perhaps even insuring a property that I don't have clean title to.

Title insurance claim accepted, now what?

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