One of the important steps in the home-buying process is to have a title search conducted. The title is the legal ownership record of a property and it's important to make sure there are no prior claims, also known as liens, on the house that might cause you trouble in the future. A title company will do the work to search all public records that mention your desired property and verify that the seller can rightfully sell you the home.
While many title searches come back clean, the whole reason these investigations are essential is because there can sometimes be issues.
Common Title Search Issues
- Public Record Errors – Simply human error like misspelled names on a property title can lead to liens being missed. Plenty of mistakes like filing errors or clerical oversight can cause confusion and a delay in the title search as well.
- Undisclosed Liens – There is the possibility that the previous owner ran into financial trouble, and some of their creditors may have placed a lien on the house. For example, if the former owner did not pay their taxes, the government can place a claim on the house, meaning the home could be seized to compensate for the overdue taxes. This could become the new owners' problem if the lien isn’t resolved before the new sale is completed.
- Title Chain Gaps – If there is any break in the legal chain of title ownership transfer, there may have been an illegal sale of the property at some point. This could affect the enforceability of prior deeds and could cause legal issues for a new owner.
- Legal Description Errors – Every property has a legal recorded description. If there are any errors in the summary, it can complicate and delay the home sale.
- Undiscovered Wills – If the previous owner died and no will is found, the home might be sold with the understanding that no will exists. If one comes to light, the current owner could be in danger of losing the house in a court battle.
- Missing Heirs – If there was a will, and the heirs are either unknown or unable to be located, any new owner of the property could face legal disputes if the heirs ever show up.
- Easements – An easement is a restriction on a property’s use. For example, the local city or county may need to use part of the property to access city water or utility service points. If there are easements that were previously unknown, the new owner might have issues with using the property in the way they want.
Possible Title Search Solutions
If any of these or other problems are discovered during the title search on a property you are under contract to buy, don't panic. These hurdles can usually be resolved without impacting your closing date. Among the many options, here are a few that you could consider:
- Request that the seller settle or resolve any title claims prior to closing.
- Hire a title attorney to fully investigate and settle any claims against the title.
- Back out of the sale and find a different property to buy.
Your attorney, title company and loan officer can help you navigate any title issues that may arise during the home purchase process. And remember, when you close your new loan, you will be required to purchase title insurance to protect yourself and your lender from any issues that might be missed during the title search.
Give us a call today if you have any questions. We would love to help you finance a new home purchase.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.