I lost title of an investment property recently to an occupant who claimed that the person who sold it to me fraudulently conveyed title away from her a year prior to my acquisition. The court ruled in her favor. Now, my title insurance company will only cover the first mortgage under the lender’s policy but will not cover my owner’s coverage due to a “rights or claims of parties other than those in actual possession…” exception. The person who sold it to me made it very clear through his title affidavit, disclosure report, and occupancy agreement (he wanted to remain in the property as my tenant) that he and only he was the only occupant at the time of my acquisition. A full appraisal of the property also made no indication of occupants other than him existed a month before I closed. I still owe $150K on the second mortgage but have no property to secure it (other than my primary home, which I don't want to lose!). What should I do? Dispute the title company's coverage determination? File for bankruptcy?
You need to consult an attorney to sort out this problem in more detail. You may have a claim against the title insurance company, the attorney who handled the closing for you, and/or the person who sold you the property. Look for attorneys with free consultations or reduced rates for a conslutation. For example, my offce gives free 1/2 hour consultations, and then a reduced hourly rate if more time is needed.