According to the Washington Post, one-third of all real estate transactions require “extraordinary work” to deal with title issues, also referred to as “clouds” or “defects.” A title company will research past deeds, court judgments, tax records, trusts, wills, divorce decrees and bankruptcy filings to ensure there are no clouds or defects. Because of this risk of issues, obtaining title insurance to avoid potential financial and legal repercussions is part of the purchase process.
Why are titles important?
In short: the property’s title is proof of ownership. A title without defects enables the seller to transfer the marketable title to the buyer. Whether the problem is major or minor, the parties must clear any defects before the sale is final.
These common title issues can jeopardize a transaction
- Unknown liens: Owners often do not know they have a lien. These outstanding debts can be for unpaid taxes, association fees, or contractor bills. Sometimes a judgment against a person with a similar name can be flagged as a lien.
- Foreclosures: Buying a foreclosed property has particular challenges. Common examples include the lender or taxing authority not notifying all parties involved in the foreclosure or the lender taking possession of the original title.
- Public records errors: These are clerical errors by the filer or even county administrators.
- Inaccurate legal descriptions: These often involve accounts of property boundaries, dimensions of the main structure and secondary structures occupying the property. Buildings, driveways or fences could encroach on your property or vice-versa.
- Invalid deeds: Titles depict a property’s chain of ownership. Each owner must legally obtain the title through a valid deed or will.
- Unknown easements or encumbrances: While easements give others legal access to the property in the title, encumbrances limit how the owner uses the property. This problem may not prevent the sale, but it can prompt the buyer to walk away from the deal if the easement impacts the buyer’s intended use.
- Undiscovered wills: Probate is supposed to get the deceased’s affairs in order, but a will may appear long after the estate was closed. The will’s discovery can result in a quiet title action that directly impacts the homeowner.
These are legal issues
Real estate transactions are often complicated, and securing title insurance is recommended in every transaction except for an intra-family transfer. Working with a real estate law attorney who will review the title commitment can help remove or modify title issues and other problems that jeopardize the sale and prevent the transfer of marketable title . Please call us at 610-936-6612 for legal guidance.