What happens if a title defect is discovered after closing?

When a title defect is discovered after closing, the most appropriate course of action is to refer to the title insurance policy. Title insurance is designed to protect property owners and lenders from defects in the title that were not identified prior to closing, such as hidden liens or ownership disputes. If the defect falls within the coverage of the policy, the title insurance company will typically provide coverage for the loss or legal costs associated with resolving the issue. This is a crucial benefit of having title insurance, as it offers financial protection and support in rectifying title problems that could otherwise pose significant risks to the ownership of the property.

The other options do not align with standard industry practices related to title insurance. For instance, returning the property to the seller is not a typical remedy for a discovered defect, as ownership has already been transferred and parties are bound by the terms of the completed transaction. Executing a new closing is also impractical since it would not resolve the underlying title issues. Finally, immediate legal action is not necessarily required unless the defect presents a critical challenge to ownership that can't be resolved through the title insurance claim process. Therefore, relying on the coverage provided by the title insurance policy is the most effective solution in addressing any discovered title defects after closing.