Shoulda had title insurance...

I wondered if one of my listings would close as scheduled when the title search discovered a mortgage from the previous owner that was never recorded as satisfied. With an owner's title insurance policy we would have simply gone to closing as scheduled in spite of the mortgage satisfaction issue and the title company would have taken care of everything. End of story.

As it was, the sellers did not have an owner's title insurance policy, so we didn't close as scheduled and instead went through a tumultuous few weeks, finally closing more than three weeks after the original scheduled closing. The good news is, we did close!

What typically would have happened in this situation is everyone would have waited for the title to clear and then close... or the buyers would have signed a move-in early agreement so they could move in as planned while waiting for the title to be cleared, then close.

In this case, the buyers decided they wanted to walk away from the whole transaction, so they signed a cancellation of the purchase agreement. But wait a minute! The sellers legally have 30 days to clear the title, so they did not sign. They did put their home back on the market subject to cancellation of the previous purchase agreement and got another offer the same day, which they did not accept. In the meantime, attorneys got involved and the original buyers agreed to move forward with the transaction provided title could be cleared within 30 days.

Meanwhile, the sellers were busy working on clearing the title. Fortunately, the previous owners were very cooperative and had kept papers they were willing to share. But while there were enough to provide a trail to follow, the sellers still didn't have the missing mortgage satisfaction, so the sellers were busy meeting with banks and title companies and following up every day until they were finally able to clear the title 2-3 weeks later.

The moral of this story, which also included several other stressful sub-plots, is that in retrospect these sellers would likely have purchased owner's title insurance when they bought had they known what was going to happen when they sold. As with any insurance, it may seem like an unnecessary expense when you never use it, but you are happy you have it when you need it. Personally, I would never buy a home without it.