Blue Ridge Office  2460 East First St. Suite B-6, Blue Ridge, GA 30513  706.258.6222  (fax) 706.258.6277

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Title Insurance - Forgery

SCENARIO:

Bill and Betty Buyer were going to their closing, when the question of title insurance came up. Betty turned to Randy Realtor, their agent, and asked, “Do you think we need to purchase Owners’ Title Insurance?” Without hesitation, Randy stated that owners’ title insurance was a waste of money and that “nobody had ever collected” on title insurance.

Almost two years after the closing, Bill and Betty get a call from an attorney. He explains that Bill and Betty had bought their house from ABC Development & Construction Co. and that ABC had bought the land for the subdivision from the estate of Dan Deadman. The estate had been represented by Dan Deadman’s sister, Sarah, who was Executrix of the Estate. Unfortunately, they have just discovered that the lady at closing, supposedly Sarah’s sister, was actually Evelyn, the Ex-Wife, who came to the closing, impersonated Sarah, forged Sarah’s name to the deed and took off with the proceeds. The real Sarah, who lived in California, just came into town to finalize her brother’s estate and found all these houses on what she expected to be a vacant 234 acres. The attorney asked Sarah, “Do you have Title Insurance?”

The litigation moved forward, as Sarah was suing everyone who had a house, and Bill and Betty discovered that those homeowners with Title Insurance were represented by Title Insurance attorneys. The attorneys had funds to defend the lawsuit, and negotiate settlement, with the title insurance companies handling the costs. Those homeowners without Title Insurance were left to handle it on their own.

Bill and Betty Buyer sued Randy Realtor, Randy’s Broker, and the Realty Company for recommending that they not purchase Owners’ Title Insurance.

Questions: Would Owners’ Title Insurance have protected Bill and Betty?

Will Bill and Betty win their law suit against Randy, the Broker, and the Company?

Answers: 

1. The part of this scenario that actually happened was that an ex-wife did indeed come to a closing, represented herself as being the Executrix and forged the legal documents, thereby putting a cloud on the title on all the houses in the subdivision.

Those homeowners with Owners’ title insurance were represented by the title insurance companies. The fees for the attorney, the negotiations and settlement, and the costs were paid by the title insurance companies. This is a “worst case scenario” that shows how valuable title insurance can be.

2. The second part of the scenario about the buyers suing their agent, the agent’s broker and the company is a possibility that I warn all agents about. It may not have happened yet, but it could. I feel it is important for agents to never advise a client not to get Owners title insurance. If anything were to go wrong where title insurance would help, somebody will eventually get around to suing someone.

If you are uncomfortable advising someone to get title insurance, you can say, “That is your decision,” or “Most people think it is a good idea, but you can decide for yourself.” You can always obtain pamphlets about title insurance from your local closing attorney. Remember, if they do get title insurance, it may cost an additional $175-$375 (depending on the sales price and equity). If they don’t get title insurance, it could cost $125,000 or $300,000, depending on the value of the home.

If you have questions about this problem, feel free to call:

J. Byron Wyndham 
Attorney at Law 
777 East Main Street 
Blue Ridge, Georgia 30513
Phone 706-258-6222
Fax 706-258-6277
email: jbwyndham@tds.net