Let’s say you bought an apartment or single-family house not long ago, and one of the nation’s biggest providers of title insurance issued your policy. That company would be Titleserv, which has described itself as follows:
We operate in 47 states domestically as well as in select international markets and provide both residential and commercial services.
Established in 1986 in Woodbury, New York, Titleserv was founded on a fundamental premise – to be the title insurance provider of choice by offering the most reliable and comprehensive title insurance services in the residential and commercial industry. . .
Access to National underwriters allows Titleserv to provide the most competitive pricing coupled with boutique service.
When a title company runs into problems, you can be sure that you, too, will run into problems. Read on. . .
As for Titleserv, does it intrigue you to learn that the company was raided by federal investigators suspicious about an alleged illegal kickback scheme several years ago and that no charges were filed?
Would it interest you even more to discover that Titleserv closed its doors without notice or explanation on April 8?
Here’s why anyone with title insurance should care.
Titleserv essentially acts like any insurance broker. It places the insurance with underwriters from another company, pays the premium for which you wrote a check at your closing and issues you a title policy.
Every title company is supposed to provide the policy ascertaining whether there are any clouds on the title — that is, unfettered ownership of your property by a lender, contractor or, say, long-lost or estranged family member who had a prior unknown claim on the property as perhaps a co-owner or beneficiary of an estate.
Other clouds in the form of liens or lis pendens (pending lawsuits) could be as trivial as a collection of unpaid parking tickets and long-overdue water bills or as substantial as a mortgage and property or transfer taxes.
A title search is meant to uncover such debts for which creditors have received or laid a claim on a property. Worse for creditors expecting to be paid when the property changes hands — it could be an institutional lender or even its previous seller, who might have issued a private mortgage to the deadbeat owner — they may have no idea that the sale has taken place.
Although they won’t come after you, those claimants eventually must be paid, assuming their dispute with the property owner is valid.
Once the title company uncovers any clouds on the title, it is up to the concern to collect all the money due during the closing, deposit the funds into an escrow account and then send checks to the parties who believe their debts have been secured by the property.
It is all too easy to imagine what an unscrupulous title company could do.
Instead of disbursing the money it has collected from the proceeds of the sale, it keeps the money. In a word, it absconds not only with deposits from a single sale but the thousands and millions of dollars that could be in the account from a whole truckload of sales.
That’s not my problem, you might be thinking.
Wrong! For two reason:
- You may well know nothing about those dark clouds until you try to sell the property yourself years later. That’s because the creditors may not have taken any further action on their claim, thinking the property could not be sold without their cloud have been lifted.
- When you do find out, you’ll be dealing with the insurance company that underwrote your policy, not a title company. And you know how joyful it is to get an insurance company to pay up for any claim, especially one that could run into hellish sums, whether it’s for a medical expense or a loss from a fire or theft. They do love to challenge and wear down their policyholders.
Although title insurance is useful in only a tiny fraction — I’ve heard percentages in the low single digits — of instances, you can be sure that the small percentage of policy holders with problems are mighty grateful for having the insurance.
It is no accident that every single institutional lender insists on title insurance to protect the collatera that backs up its loan — your collateral. Yet many buyers decline to buy an owner’s policy in addition to the one that their lenders demand. There is some debate whether the risk of needing one justifies the cost of buying one.
But one thing I know: If I had closed on a property insured by Titleserv, I’d be worried sick. I certainly would want to know that no clouds could be hovering over me and waiting to dump on me a bucketful of problems that will cause me to lose sleep, waste time and energy, argue with an insurance company, and spend money.
You have been warned.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022