Property Title Issues That Can Stop You From Closing on a House

Buying or selling a home often signals the start of a new chapter in your life. But every home has its own history, and unresolved property title issues can present significant difficulties when you are buying or selling a house. Unpaid debts, divorce, disputes over property lines, or even a mistake in the property records can make it unclear who owns a home and create problems when it comes time to transfer ownership.

You can protect yourself against a title defect by having an attorney perform a title search. In addition, you should purchase title insurance for protection against problems that may arise from a title defect discovered after the transaction has closed.

Common Property Title Issues

When buying or selling a home, it is critical to establish that the seller has the legal right to sell the property. You need to be certain that there are no title defects that would prevent the seller from being able to convey marketable title of the property to the buyer.

A title company will examine public records, searching for past deeds, wills, trusts, divorce records, bankruptcy filings, court judgments, and tax records to ensure that the seller has clear title and can legally transfer the property to the new owner.

Common title issues include:

Errors in Public Records

If there are mistakes in a property’s prior deeds (the legal document that identifies the property and provides specific details about it), such as clerical error or missing information, the mistake may need to be fixed before title to the property can be transferred.

Liens

If the seller has unpaid debts or taxes, the business or government entity they owe can place a lien on the property. This means the seller cannot convey marketable title to the property until the debt is repaid.

Regardless of the cause, the lien must be resolved before title can transfer.

Boundary Disputes

If a home’s boundary lines are unclear or if surveys show different boundary lines, a neighbor or government entity could be able to claim partial ownership of the property. These issues must be addressed before the sale.

Illegal Deeds

If a prior owner improperly documented their ownership interest, such as if they were married but claimed to be single, were of unsound mind, or were a minor, there could be an issue with the enforceability of title and the owner may not be able to transfer title.

Unknown Heirs

If a property owner died before selling the home, a family member could step in and claim an ownership interest in the home. This could impact the present owner’s interest in the home and their ability to convey clear title.

Forgeries

A forged document filed as a public record could obscure rightful ownership of the property. If the forgery is later discovered, you could find that you do not have clear title to the property.

Encumbrances

Before buying or selling a property you must ensure that there are no third parties who hold a claim to all or part of the property, such as an option to purchase or a right of first refusal.

Easements

An easement may allow someone else, such as a neighbor or a government entity, to enter or use all or part of your property. While an easement is not always detrimental to the sale, it is important to understand how an easement can impact your right to use and enjoy your property.

How an RKPT Real Estate Attorney Can Help

Before buying or selling a home, you should work with an experienced real estate attorney who will perform a title search and review documents to ensure that the buyer can legally transfer ownership rights in the property. If there are defects in the title, a lawyer can address these issues so the title is clear and the property can be legally conveyed.

In addition, you should purchase title insurance to ensure you are protected in the event there is an undiscovered issue that clouds the title to the property.

Most lenders require the borrower to pay for the lender’s title insurance policy, however, the lender’s title insurance policy only protects the lender and does not afford any protection to the borrower. To protect yourself, consider purchasing a separate owner’s title insurance policy. The cost of title insurance is often included in the total closing costs. While title insurance is an additional expense, it can save a home buyer money in the event of a title issue.

To learn more about our real estate practice and Safe Title Agency, a wholly-owned subsidiary of RKPT, we invite you to contact us.