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Buying a home is an intricate process from start to finish. Locating an agent, determining budget limitations, competing with other buyers, and several other issues can complicate the buying process and delay move-in dates.
Even more worrisome are title issues, which can delay the purchase transaction and cause many headaches for home buyers. Below are 5 common issues buyers encounter during the title search.
Whether Sellers Have The Right To Sell The Property
It seems counterintuitive to consider whether sellers have the right to sell the property. If they put it on the market, it is assumed they are authorized to sell. However, many times a person selling a home may not realize he or she cannot sell the property as-is.
For example, if a property owner was married upon purchasing the house, and has since divorced, it may be necessary to contact the former spouse to complete the closing.
If the previous co-owners of the home have passed away, the current buyer, through his title company, may have to locate heirs and determine how the proceeds will be partitioned before moving forward with the closing.
Other issues may arise if one or more of the sellers have declared bankruptcy (which requires a petition to the court to complete the transaction) or if a previous deed did not convey the entire property to the current owner (for example, if the current seller has a quit-claim deed rather than a general warranty deed).
Whether There Are Clouds On The Title
A “cloud” on a title means that while the seller has the legal right to transfer the property, they cannot do so until one or more things are cleared from the title.
The most common example of a clouded title is one that has a judgment lien, tax lien, materialman’s lien, or a laundry list of other liens. When a debt goes unpaid, the collection attorney or person in charge of the debt can place a lien on the debtor’s home.
There are many types of debts which can end up as a lien against the property, such as unpaid child support or taxes, unpaid credit cards, or a failure to pay for maintenance or repairs on the home.
These issues are revealed prior to closing. The title company handling the transaction will conduct a thorough investigation of the property to find prior owners, possible liens, and any other impediments to a clear and marketable title.
Before the home can be transferred from the seller to the buyer, all of the liens and other title issues must be resolved.
Whether The Deed Is Legal
Sometimes, even when the title seems clear and the previous owner purchased it through what seems like a valid transaction, a deed can still be rendered illegal if it was made by an undocumented immigrant, a minor, a married person who claimed to be single, or a person who is not mentally capable of entering into a real estate transaction.
Likewise, a previous deed could have been forged or involved a person who misrepresented their identity in order to effectuate a sale.
Errors In Legal Documents
Unfortunately, there are occasional errors in the legal documents themselves. During prior sales, an attorney could have inadvertently placed an inaccurate legal description on a deed, failed to get a necessary signature, or failed to file the deed with the county properly.
These issues do not mean that the sale cannot happen; however, these issues will require some extra work before closing. Past mistakes must be accounted for to ensure that no one approaches the buyer in the future with a claim to the property due to an attorney’s error.
What Title Issues Mean For The Buyer
Besides these common items, there are many other issues which may come up during the investigation of a home prior to closing. When title issues are discovered, there are many possible outcomes.
Hopefully, all of the title issues can be cleared easily, and the transaction can take place without delay. This is the most desirable outcome.
Frequently, clearing title issues can extend the closing date by several months, causing both parties added stress and anxiety about the transaction.
Finally, the seller may occasionally choose to back out of the transaction altogether if it becomes too difficult to successfully clear the title.
