When you acquire property from a seller and simultaneously sell it to a third-party buyer, as a briefly intervening title holder, you may think you don’t need an owner’s title insurance policy. After all, you’re only holding onto the property for a few seconds and not even taking possession of it. So, what’s your risk if an eventual title issue arises?

Even if you own the property for only a few seconds, hours, or days, you’re entering the “chain of title,” or the ownership record. If any title issues arise later, you could be dragged into legal disputes. Some problems are not discoverable through a standard title search, and don’t surface until later:

• Errors in the public records
• Forged documents
• Omitted signers required for effective transfer from an LLC or other entity
• Undisclosed purchase agreements or other contracts
• Undisclosed heirs

As long as the end buyer has an owner’s title insurance policy, they can file a claim for any covered issues that arise. They can also, however, make a claim against their seller to enforce warranties provided in the deed that was recorded to transfer title. If the end buyer did not get an owner’s title insurance policy, then seeking recovery from their seller may be their only option. And even if a title insurer accepts the claim and pays the insured, the title insurer may seek recoupment from the seller or a previous title holder, depending on the circumstances. The ... Read More…