The real estate world is not just buying and selling properties. It is a complex nexus of details and attributes associated with those properties. A property’s title is the foundation for the real estate transaction. The title is the legal grounds for ownership for the buyer.
But sometimes, these transactions may encounter title issues. Now that’s a problem! Issues with the title could break the deal. These issues may range from simple clerical errors (trust me that happens even today) to difficult legal disputes that may last years.
You don’t want to waste time processing complex paperwork and paying legal fees. As such being aware of the title and associated information may be helpful.
What is a Title?
Before we kickstart the issues, let me explain what a title is. A title is a legal document that establishes ownership of the property. It generally includes details about:
- The property
- The owner
- Any rights or restrictions associated with it
What are the most Common Title Issues in Real Estate?
Now that you know what a title is, I’ll talk about some common title issues you may or already might have experienced.
1) Liens
A lien is a legal claim against a property, typically as collateral for a debt. A property with an outstanding lien cannot be sold until the debt is resolved. Some of the most common types of liens include:
- Mortgage Liens: These are placed by lenders to secure loan repayment. If the seller has an unpaid mortgage, the lien must be cleared before the property can be sold.
- Tax Liens: Governments place these liens when property taxes are unpaid. These liens take precedence over other types of liens and must be paid off to avoid foreclosure.
- Mechanic’s Liens: Contractors or suppliers who have provided labor or materials for property improvements can place these liens if they are not paid.
2) Errors in Public Records
Clerical errors can cause significant delays and problems during a title search. Even a simple spelling mistake that changes the name from “Alex” to Alexa” is a red flag. Other errors might include incorrect property descriptions or recording mistakes. These inaccuracies must be resolved before proceeding.
I am sure you are surprised that clerical errors are still a thing in today’s data-driven world. But these errors still happen and are a cause of stress to many.
3) Missing Heirs
When a property owner dies without leaving a rightful legal heir, THERE IS A PROBLEM. Determining rightful heirs is a complex puzzle. Missing heirs may come forward years after the property has been sold and this may lead to legal disputes.
One of our clients was in a long legal battle with a third party because of this situation. The situation lasted for three years until our client was able to prove they were the rightful heir and retained the property. This caused them stress and a massive financial burden in legal fees.
4) Boundary Disputes
Disagreements over property boundaries can arise due to inadequate property descriptions or conflicting surveys. These may negatively impact the value of the property. Resolving boundary disputes requires legal negotiations.
Boundary disputes may include a simple conflict with your neighbor to large industrial land.
5) Easements
Easements are relatively simple and are not known to cause that much trouble. An easement is a right granted to another party to use a portion of the property for a specific purpose such as access roads or utilities.
6) Forgery and Fraud
Forgery and fraud seem something out of a white-collar crime movie. Although less common, fraudulent transactions can pose significant risks. These include fake signatures, altered deeds, etc. These issues can lead to lengthy battles to establish ownership.
7) Foreclosure Issues
Foreclosed properties can have lingering title issues. Prospective buyers should ensure that the foreclosure was legally sound and all claims have been settled.
8) Zoning Restrictions
Zoning laws regulate how properties can be used. Buyers should be aware of these to avoid legal problems.
What are the Implications of Title Issues?
By now you should realize that problems with the title could have serious implications on real estate transactions. Some of these include:
- Delayed Transactions: Resolving the issues with the title takes time and could cause severe delays to the deal. Complex issues may even take years to resolve.
- Financial Losses: Buyers may incur extra fees in the form of legal fees, surveying costs, etc.
- Legal Disputes: Unresolved title issues may result in legal disputes that could be time-consuming.
- Loss of Property: In severe instances, unresolved issues may cause the buyer to drop the property.
How to Resolve Title Issues?
1) Title Insurance
Like any other insurance, title insurance protects buyers and lenders from financial loss due to title issues. The cost of title insurance may vary from region to region.
There are two types of title insurance:
- Owner’s insurance.
- Lender’s insurance.
2) Thorough Title Search
Conducting a detailed title search is essential. It involves examining public records to identify any issues, encumbrances, or other problems affecting the title. Engaging a real estate attorney might be useful at this stage.
3) Clearing Liens
Before closing, any liens on the property should be addressed. This may involve paying off debts or negotiating with the creditors.
4) Survey and Inspection
A professional survey could help with issues related to boundary disputes and easements. Furthermore, an inspection could identify any physical encroachments that might not be evident in the title records.
5) Legal Assistance
When it comes to complex title issues, seeking legal assistance is advisable. Real estate attorneys could help navigate disputes, clear the issues, and ensure that all documents are filed properly. Legal expertise is invaluable in resolving disputes over inheritance, forgery, etc.
6) Negotiation and Settlement
Some title issues might be resolved through negotiations in a conference room. For instance, boundary disputes are often resolved by reaching a mutual agreement on property lines. Open communication between the parties involved could lead to amicable solutions.
The End
Title issues are complex, mentally challenging, and financially draining. You do not want to add to the list. If the title search reveals even a modicum of trouble, your best bet is to proceed with smartness.
Do not get dragged into legal disputes that may last years or force you to lose the property. Seek legal aid and arm yourself. You are now aware of the common title issues in real estate deals so act accordingly before buying.