Buying or selling a property is one of the largest financial transactions a person undertakes. Title issues can complicate the real estate transaction, as these can negatively affect ownership rights or prevent an owner from selling a property. The closing may be delayed if title defects are present, or the buyer may face legal disputes and financial losses. Buyers must recognize this and take steps to identify and resolve title defects before finalizing the sale.
What is Title to a Property?
Title to a property is a legal document that declares an owner’s rights to real estate. In addition to naming the legal owner of a property, it outlines the rights to use, property boundaries, and any liens or claims against the real estate.
Title Defects
Title defects are a concern because they are legal issues. Any defect I title could delay or stop the property transfer from the seller to the buyer. Errors, liens, and fraud are three issues a buyer may encounter with a title. The buyer must confirm that they are resolved before closing. Any unresolved defects may result in legal disputes that arise after the purchase is complete.
Every person who buys or sells a property is not legally required to, but definitely should, work with a title company. A title company can conduct a title search to ensure that there are no defects with the title that could cause problems for the buyer or seller when completing the transaction.
Many people associate tax liens with title issues. However, there may be an error in the public records, or previous owners might have had a dispute that could lead to problems for the buyer. Any problem might delay the closing process or bring it to a complete halt.
The title search reveals any existing legal claims and liens against the property. The title insurer and title company will require that these issues be resolved prior to the closing of a real estate transaction so that the buyer can receive a clean title. A real estate attorney in Texas can help the buyer and/or the seller resolve these issues, enabling the transaction to proceed.
The buyer might also wish to invest in title insurance. This insurance protects them in the event that someone claims ownership of the property in the future. Understanding potential hurdles helps buyers prepare for any eventuality so the transaction moves smoothly from start to finish.
What are Common Title Issues?
Unresolved Liens
Unresolved liens can result in legal claims against properties. The title search confirms that there are no outstanding debts for which the property might be subject to. For instance, tax liens and mechanics’ liens against a property must be released before closing. Failure to resolve the liens could lead to a title defect and potentially subject the property to foreclosure. A title company or real estate attorney identifies and works to correct these issues, allowing the buyer to proceed with the sale.
Fraudulent Documents
Title companies and real estate attorneys must also be vigilant for illegal deeds and other falsified documents. A fraudulent transfer or forged signature can lead to problems for the future owner, so they must be resolved before ownership is transferred. While sellers typically buy a title policy to protect the seller in the event of a defect in title, buyers may also wish to invest in their own title insurance to protect against financial losses that could arise from fraudulent documents.
Fraudulent deeds include those executed by a minor, those that were obtained through duress, and deeds signed by those of unsound mind. Sadly, forged signatures and fraudulent conveyances are more common than many imagine, which is why the chain of title must be scrutinized and verified.
Chain of title documents trace property ownership over time. They identify all previous owners and transfers of ownership. Any error in this document can lead to significant title issues and disrupt the closing process. When the buyer and seller know of these issues, they can address them to avoid complications.
When reviewing the documents, the title company or real estate attorney confirms that all previous owners appear on the document. If an owner is missing, they or their family members may file a legal claim. The title search identifies and addresses these issues to avoid potential legal claims.
Legal Description
When a
property's legal description is incorrect, it must be fixed before the transaction can proceed. This description outlines the property's location and boundaries. The error may not appear to be a significant issue, but it could lead to a future dispute over property boundary lines or issues with property surveys. The buyer must ensure the accuracy of this description before the sale is finalized. Title insurance can help prevent inaccuracies in the legal description by providing the buyer with piece of mind that what they are purchasing is, in fact, what they are getting. If there are any issues that arise, the title company and, in more complicated situations, a real estate attorney, can assist in fixing any errors in legal description which may arise.
The title company or real estate attorney also verify the accuracy of maps, check for conflicting surveys, and resolve any neighbor disputes related to land use. Easement agreements must be reviewed, and the buyer might want to request a survey to reduce the risk of boundary disputes and unidentified encroachments.
Recording Errors
Title documents are recorded with the county where the property is located. Any errors can create confusion. An example of a recording error is when a document is not properly recorded and fails to appear in public records, leading to problems for the current owner.
Misspelled names and minor typographical errors also create problems during the closing process. For example, when an owner’s name is misspelled, it can be challenging to determine the property owner’s legal rights. The title agent or real estate attorney ensures corrections are made so the document accurately lists the property owner. The closing date may be postponed until the error is corrected.
Another problem a buyer might encounter is a missing mortgage assignment. When a lender sells a mortgage, they must record the assignment in public records. If the lender fails to take this step, the title company might need to investigate who now holds the loan. Without this information, obtaining a clean title may be challenging.
Missing Heirs
Some property owners die without a clear will. Others have no heirs to inherit the estate. When they do, the property may go up for sale. The title company or real estate attorney will look for unknown heirs who may become known at a later date and file a claim against the property. They examine probate records and take due care when handling the transfer of property.
Identifying Title Errors
Buyers need to identify title errors early in the purchase process so they can be addressed before closing is delayed. The first step is to determine the errors, which can be done through title searches and property surveys, allowing for the correct action to be taken to resolve the matter. When an issue is found, contact a real estate attorney and the title company.
Seek Professional Help
Real estate attorneys advise clients on how to resolve these issues based on the specific circumstances of each case. The attorney provides information on the legal rights of the property owner. Title companies are often the ones who uncover these problems. They work with the client and the real estate attorney to correct the issues. The client may also consider purchasing title insurance for added protection against defects in title.
Correcting the Error
Correcting the error depends on the problem. The seller may need to settle tax liens before proceeding with the sale. The attorney and title company can contact the proper authorities to update public records or correct legal descriptions. They can also ensure that all documents accurately reflect the correct owner and property lines or have this information corrected.
The attorney may need to file a
quiet title action or work with the courts to clarify accurate ownership of the property. They may need to record a lis pendens to let others know there is a legal action regarding the property that is pending or assist in settling a dispute regarding the property. When fraud is the issue, the attorney works to have a fraudulent deed voided, thereby reinstating valid ownership.
Communication
All parties must be informed of each step of the process. The buyer and seller must communicate directly or through their real estate agents to confirm everyone remains on the same page. Clear communication reduces the risk of a closing delay and misunderstandings that can lead to the sale being canceled.
Resolution Verification
The buyer should confirm with all parties that the matter has been resolved before closing. A final title search should be conducted right before closing to verify this is the case and no new problems have been identified. All public records should contain accurate information, all liens must be paid, and all legal descriptions must be correct. Verifying these things ensures a smooth and successful closing.
Buyers and sellers must identify and resolve title problems as early as possible, but before closing, to ensure the closing is successful. These issues can result in the transaction being delayed or canceled. Thorough title searches allow problems to be identified and addressed. Many buyers and sellers work with a real estate attorney to ensure that the sales process is conducted legally and in accordance with the terms the parties intended.
Buyers often assume the title company will handle these issues on their behalf. However, a title company does not represent the buyer and has no duty to ensure the buyer is protected. Rather, the buyer should consider consulting an attorney to ensure the transaction complies with all applicable state laws and that any disputes are resolved legally. Unless the buyer knows up front they he is buying a property with a defective title, no buyer wants a title with defects. Defects in title can be costly to an unsuspecting buyer. An experienced attorney ensures all problems are corrected before the transaction is finalized. With their help, a buyer has peace of mind knowing they won’t be purchasing a property that may not legally be theirs.
Disclaimer:
Ruelas Andino Law, PLLC makes no claims as to the accuracy of the information contained within the external links in this blog article nor does it endorse any of the businesses contained in the links. Information contained in this blog is for informational purposes only and may not be construed as legal advice.
