Top title insurance claims (1 - 5)

Title insurance claims arise more often that you might think. Below is a list of the most common title insurance claims for the District of Columbia, compiled by Elisabeth Zajic, vice president and senior counsel for First American Title Insurance Companyin D.C.

For further reading, the Underwriter Bulletins contain a wealth of information geared more toward the industry but still valuable for anyone who's planning to buy a home.

1. Fraud.

I. Uninsured recent no-consideration "gift deeds" to a family member may be forged or obtained through undue influence, enabling the grantee to sell or arrange for a cash-out refinance of the property and abscond with the cash value of the equity. Fraudulent intra-family conveyances represent a large percentage of claims in the District of Columbia.

II. Mortgage foreclosure "specialists" scout out properties for which a foreclosure notice has been filed but with a lot of equity, often titled in elderly persons. They offer to "save" the home and end up taking a deed to the property.

III. Flip transactions, both legal and illegal, remain extremely popular in D.C. Remember that even if your flip transaction is not otherwise fraudulent, there must be full disclosure to all parties of all pertinent details of the transaction.

IV. When a property is acquired without purchase money financing and the new owner subsequently refinances, taking out the cash value of the equity in the property, pay special attention. This is unusual and the refi frequently follows a deed which was forged or fraudulently obtained.

V. Don't forget the basics. Compare the signatures on your documents against signatures of record and on ID. Give careful scrutiny to powers of attorney and be sure to verify the signature of the principal. Don't blindly assume that all notarized documents are valid.

VI. Trust your instincts. If the deal doesn't "feel" right, it probably isn't.

2. Recording. The failure to record promptly is a major cause of claims.

3. Real Property Taxes. In ascertaining tax status for a D.C. closing, you should proceed as follows:

I. In addition to ordering a tax certificate, you should now check the D.C. Tax Rates and Revenues website for every closing, and document your file with printed copies of the account information. The site information for receivables is updated regularly, with effective dates displayed. Your last check of the site should be done just before closing.

II. The date shown on non-real property tax receivables is particularly important because the Office of Tax and Revenue (OTR) has reached an agreement with the D.C. departments and agencies generating these receivables whereby, unless the liens are either recorded or posted on the website prior to transfer of the property, they will be unenforceable against a bona fide purchaser and will become a personal liability of the seller instead of a real property lien.

III. Order tax certificates. Although the website is a great resource, it does not, at present, create a legal estoppel as to unreported taxes and assessments, as does the tax certificate. The turn-around time for tax certificates is very good at present.

IV. Investigate charges or assessments incurred by previous owners before paying them. OTR is presently seeking to collect a number of previously unbilled tax and assessment liabilities, including, but not limited to, vacant and abandoned property liens, homestead audit liens and Clean City liens. If the taxes were previously unbilled and the property has transferred to a bona fide purchaser, OTR will not enforce the liabilities against the present owner. Instead, the tax will become a personal liability of the former owner responsible for the delinquency, and OTR will provide you with a corrected bill waiving charges.

4. WASA. Claims on D.C. Water and Sewer Authority liabilities have risen dramatically in recent years. One reason for this unfortunate trend is the WASA procedure, which dictates that a new account be established for any given property each time that a final bill is requested. The new account will be opened regardless of whether the old account(s)nt.