Real estate fraud and title insurance have recently received a great deal of media attention.

There are two major types of real estate fraud: identity fraud and value fraud. In identity fraud, the fraudster steals mortgage funds by assuming the identity of the borrower, or by posing as a lawyer who represents fictitious borrowers. In value fraud, the fraudster artificially inflates the true market value of the property to deceive the mortgage lender.

Home buyers and home owners can protect themselves against real estate fraud by purchasing title insurance. A title insurance policy is a legal contract between the insured home buyer or home owner and a title insurance company. There are several title insurance companies operating in Ontario. A policy protects the insured against covered risks existing on the date that the policy is issued. Many policies also offer protection to the insured against real estate fraud during the time the insured owns the property. There is a one-time premium for title insurance, usually around $200 to $300 for a residential home valued at less than $500,000.

Statistically, the chances are slim that a particular property will ever be the subject of real estate fraud. However, if a home buyer or home owner is concerned about real estate fraud, then purchasing title insurance can provide peace of mind. A home buyer can purchase title insurance when he or she buys the property. A home owner who did not obtain title insurance when his or her property was bought can purchase title insurance any time during his or her ownership of the property.

It is important to understand that if a home owner’s property with title insurance coverage became the subject of fraud, title insurance may not necessarily undo the fraud and arrange for a transfer of the property back to the rightful owner. The title insurance company may, rather, compensate the insured for any losses up to the policy amount, less any other payments made under the policy.

The policy amount is typically the purchase price or the assessed value of the property. Some policies even offer inflation protection so that the policy amount will increase based on an increase in value of the property, up to a maximum of 200% of the original policy amount.

The benefit of title insurance is that the defrauded home owner will be compensated. Without title insurance, the defrauded home owner will have to go to court or attempt to seek compensation from the Land Title Assurance Fund, if available, at his or her own expense.

For home buyers and home owners who are concerned about real estate fraud, title insurance can provide peace of mind and financial protection. Title insurance must be arranged through a lawyer.