There are two kinds of title insurance every homeowner needs to know about: lender’s title and owner’s title.

As you might guess, lender’s title insurance is designed to protect only the lender, and is always included in loan closing costs. If you, the buyer, want the same level of protection against possible ownership problems, you must purchase an owner’s title insurance policy for yourself.

Unfortunately, many buyers simply don’t do it. And in my opinion, they are taking a big risk.

The record of ownership of the property you are buying is set down in writing at the county courthouse, and is referred to as the "chain of title." That chain relies, to a large extent, on the honesty of the persons filing those documents, and, to a lesser extent, on the efficiency of the Superior Court Clerks over the past fifty years.

Owner’s title insurance protects you against problems associated with the ownership of the property you are buying. And those problems can come in a variety of forms.

Last week we saw how a tax lien filed weeks before a closing could become your problem due to the time it takes a the Clerk of Court to get documents indexed properly. The lien becomes effective the day it is filed, but some clerks take months instead of days to get the liens indexed. Once indexed, they become visible. That period of time between filing and indexing is called "the gap," and it is that gap where title insurance covers you.

Any buyer purchasing any real estate buys "subject to" legitimate liens or judgements filed during the gap. The greater the gap, the greater the likelihood that some legitimate claim has been filed against the property which could not be discovered by a search of the records. Only by purchasing owner’s title insurance can the buyer be covered against financial loss.

The cost of owners title insurance in metro Atlanta is about $2.00 per thousand of purchase price, and it is a one-time premium. It is typically offered as an optional product at the real estate settlement. The purchaser is then protected for as long as he or his heirs own the property.

Metro counties vary widely in how far they are behind in getting recorded instruments indexed. My research indicates that recently, Cobb County had the most up-to-date records with a gap of only 5 days, while DeKalb and Gwinnett had 14 and 17 days respectively. Fulton County lagged behind with a 27 day gap, but Fayette County struggled to keep up at 56 days behind. The worst gap I found in the area was fast-growing Cherokee County, just now revealing liens filed a whopping 185 days ago.

That means that even if you checked all the courthouse records yourself with a fine toothed comb, you would be unable to find any title problems that have cropped up in the last six months. Local officials blame a persistent real estate boom coupled with unprecedented growth. Georgia title insurance companies are nonetheless worried.

Charlie Harrison, of Old Republic Title Insurance, wonders how long his company will be able to continue writing title insurance in counties where current records are simply unavailable. He says "competitive pressures" have forced Georgia title companies to swallow these risks, but not without cost.

Harrison cites recent increases in fraudulent real estate mortgage transactions involving "the gap." In once such case, a buyer applied to (and was approved by) multiple refinance lenders for closings all on the same day. The scammer went from closing to closing, collecting funds at each stop. In each case, the lender purchased lender’s title insurance, so they were covered against financial loss.

In addition, Harrison told me about the Anne Place Subdivision.

It seems that in 1954, Minnie Wood bought 55 acres in Cobb County near Mableton. In 1979, someone who said they were Minnie Wood sold the land. On that land 59 homes were built in a subdivision named Anne Place.

It turned out that the woman selling was not the real Minnie Wood, who had actually died a year after buying the property. She had left the land to her two children James and Marjean.

Well, James Wood, now deceased, had married and divorced a lady named Margaret, and it was his ex-wife Margaret who had sold the land pretending to be Minnie Wood. Margaret Wood, who reportedly received about $225,000 for the property, could not be reached for comment.

Since you can not sell what you do not own, the sale from Margaret was not legally binding.

The rightful owners filed a lawsuit asserting their ownership of the land upon which the houses were built. In the end, the homeowners who had purchased title insurance were protected, while those who did not had to settle with the rightful owners individually.

As we saw last week, claims against title are rare. In most property you will buy, you will never have a problem. But when a problem of ownership does occur, it tends to be expensive.

There are many other types of problems covered by title insurance, including forgery, lack of legal authority, poor legal descriptions, and missing heirs. Only by making this one-time purchase can you know that you are protected.