In-Depth: Trouble with Title Insurance

MINNEAPOLIS - What would you do if your neighbor knocked on the door and said, guess what? I actually own part of your yard. Think it can't happen? Think that title insurance you bought will protect you? A FOX 9 viewer contacted us. He was frustrated he had to spend 18 thousand dollars to fix a property line dispute with his neighbor.

Ed Decker knew he had a great back yard when he bought this place.

“It's such a beautiful yard especially for little kids and stuff. We like the big weeping willows.” Decker said.

What he didn't know, until years later, was his shed and septic system were really on his neighbor's land.

“They wanted me to move the septic tank, the shed.” He said.

And he owns two feet of the land under the other neighbor's house.

“This is approximately how far the property lines are off.” Decker explained.

He ended up in mediation to resolve the dispute. It turned into an 18 thousand dollar mess. Attorney David Meyers says, “I don't want to alarm people and say it's common but it certainly happens often and there are a lot of reasons for it.”

Meyers can't say how many border battles he helps resolve but there are enough that he makes a living at it. “Yes, that's true,” he laughs.

Like any diligent buyer Decker read over the legal description of the property before signing the papers at closing. And he figured his property went up to the fence line on one side and where the neighbor stopped mowing on the other.

“You mowed what the neighbor didn't mow,” he said.

And just to be safe he, like most home buyers, bought title insurance in case there ever was a problem.

“I thought it would take care of any legal problems, anything within that legal description of your property.” Decker said.

But Decker found out too late, his policy didn’t give him the kind of protection he thought.

“To me it's a piece of junk. An expensive piece of junk.” Decker said.

Homeowners are required to buy title insurance for their mortgage lender. The title companies research a property's history to make sure there isn't any money owed on back taxes, or construction work.

The Commerce Department regulates the industry.

Spokesman Bill Walsh explained, “It is important to get the work done, do the research and a have a title company do that and it is necessary the question is how much does that value and how much does it cost.”

For a few hundred bucks homebuyers can also buy a separate policy for themselves. But it's critical to look at what the policy will not cover. You can find the so called exception listed on the policy's schedule B Section 2 page.

Meyers said, “Read it, understand it and get as much off that page as you possibly can get off that page. A nice blank schedule b2 would be a great asset for the policy."

Meyers says, if you ask, you can get the exceptions waived. You may want the insurance to include survey coverage which will protect you in the event of a property line dispute.

Meyers said, "They will give you survey coverage and you want to ask them to do that. That is a great enhancement to your policy for very, very little if any extra cost."

Decker assumed the policy he bought meant he'd have no worries.

“Essentially what I bought was an expensive insurance policy and they put a whole bunch of check marks on it not to cover anything.”

D says the insurance company made it seem like he was getting everything he needed. He said “thank your realtor for signing you up for the eagle policy, that's the best policy you can get.”

And that brings us to the next piece of advice: shop around for title insurance. Don't just rely on whatever your real estate agent recommends.

Walsh said, “You want to know that the referral is based on their work and not a spiff or a kick back, and that's our interest in trying to protect the consumer."

Decker and his neighbor resolved their dispute by basically splitting the difference on the property line. But he doesn't want anyone else to take a hit like he did. “I feel sorry for anybody else that's got these policies, it's frustrating 18 thousand dollars in legal fees is a lot of money that's thrown out the window. I didn't get anything out of it.”