Two Lots. No Insurance

A property owner subdivided her property into two lots.

She kept one lot and decided to sell the other lot to an acquaintance. She conveyed the new, second lot by quit claim deed.

The new owner built a house on his new property and took up residence.

Sometime later, the new owner received notice that his property was in foreclosure. He was not able to find the person who sold him the lot, so he contacted a title company for more information. He discovered that the original owner had an existing deed of trust on the property which encumbered both lots and the owner was in default on her loan.

The original owner had not consulted her mortgage company when she subdivided her land.

The mortgage company did not release the new, second lot from the loan when it was sold. She took the money she received from the “Sale” of the second lot and left town.

Maybe the original owner did not understand the process, and this was an innocent mistake, however, if title insurance had been provided on the sale of the second lot, the new owner would not be losing his home and his investment.

Posted in: Title Insurance

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