Real estate transactions are rarely a done deal once the purchase contract has been signed. There are still a few steps to get through before you reach your closing day, one of which is the title search. This is when documents on the history of a property are reviewed to determine if there are any problems concerning the transfer of that property. In the case of a prospective purchase, a title search is primarily done to answer three questions relating to the property:
- Does the seller have any saleable or marketable interest in the property?
- What kind of restrictions and allowances pertain to the use of the land?
- Are there any liens on the property that need to be paid at closing?
No real estate transaction can proceed properly until the title is cleared. This can slow down a transaction and even lead to a deal falling through if the issues can’t be resolved. There’s also the chance that the title search may have missed something which only comes to light after the closing. This is why title insurance is so important for buyers. It protects you against having to pay for these issues. Here’s a look at the most common title issues that could affect your purchase.
1.) Errors in Public Records
Mistakes happen but when they relate to your homeownership the results can be devastating. Any clerical or filing errors can affect the deed or survey of your property and lead to heavy financial strain in order to resolve them.
2.) Unknown Liens
The previous owners of your property may not have been the most meticulous bookkeepers or bill payers. Liens are any unpaid bills that are tied to the property. It’s usually just the mortgage but it can also include unpaid credit card bills, taxes, and child support judgments. Essentially, Liens are anything that can be filed in public records against your property. Even though the bills aren’t your own they become your responsibility after the closing. The initial title search is meant to find these and make sure they’re paid off before the sale is closed. However, they can still crop up even after the property is transferred.
3.) Illegal Deeds
The chain of title on your property may look sound but it may be discovered that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or someone who reported being single but was actually married. An issue like this can affect the enforceability of a deed and possibly your ownership of the property.
4.) Missing Heirs
Estate problems can crop up long after a property has been purchased and affect your rights to it. When a homeowner dies, their will may be left to their heirs. However, these heirs can sometimes be missing or unknown at the time of death. They can then turn up later and contest your ownership of the property. It can also happen that the owner dies without leaving a will or that the will wasn’t probated. Either of which could lead to the ownership being contested.
5.) Forgeries
Sadly, not everyone is honest. It sometimes happens that forged documents relating to the ownership of a property are filed in public records. These can obscure the rightful ownership of a property and put your rights to it at risk.
6.) Undiscovered Encumbrances
Encumbrances relate to when a third-party holds a claim on all or part of your property. This can be due to a lien or non-financial claims like restrictions on the use of a property.
7.) Unknown Easements
An easement is when a government agency, business, or other third parties are allowed to access all or part of your property. While this doesn’t affect your ownership of the property it can impact your right to do what you want with it.
8.) Boundary/Survey Disputes
During the purchasing process, you may have noticed several surveys being done evaluating your property’s legal boundaries. If there are any other surveys that show different boundaries there could be some complications determining your property line. This could allow a third party to claim ownership of a portion of your property.
The Importance of Title Insurance
All of the above title issues can have serious repercussions for a homeowner. The worst thing about title issues is that even if the initial search was very thorough, unknown issues can still arise long after the sale was closed. Fortunately, homebuyers can protect themselves against this by taking out title insurance. It protects you against loss or damage from undiscovered liens, encumbrances, or defects in the title or ownership of the property. Best of all, it’s unique in that it protects you against past claims as well as future ones. At its most basic, title insurance will cover the following:
- Ownership by another party
- Incorrect signatures and forged documents
- Errors in public records
- Unrecorded easements
- Encumbrances or judgments against the property such as unpaid liens
All of this might sound scary or overwhelming. But there’s no need to worry. Consider hiring an Exclusive Buyer’s Agent to be an advocate for you while you’re purchasing a home. They’re uniquely skilled and qualified to help look at for your best interests as a buyer.