Buying or selling a home is a complicated process that involves many different factors and players. Once the buyer and seller agree on price, escrow opens, and the closing process begins. One of the key elements of a successful closing is a clean title. A clean title shows that the owner has full legal right to sell the home and that there are no standing claims against that property.
That’s where title companies, like Landmark Title, come in. Title agencies ensure a clean and easy transfer of title with a title search. To understand the basics, agencies access and examine the status and the history of the property title. Then, all related documents are carefully reviewed- this includes taxes, assessments, judgments, and deed history. After checking the information, if the title on the property is clean, the remainder of the closing process can be relatively smooth. It gets complex when you find hidden claims on a property. Although most of these claims are simple to address, a few can turn into bigger issues and can slow down the process.
Common title issues
Public record errors
If there are mistakes in a property’s deed, a clean title closing is tricky. The deed contains all the details of ownership and any specific information on the property. Any missing information or clerical errors need to be corrected and the deed might require re-filing before a clean closing can happen.
Clearly defined property lines are necessary for a successful closing. If the property encroaches on public land or another individual’s property, a neighbor or public entity might be able to claim ownership.
Forgery and fraud
Any illegal deeds jeopardize a clean title. If any previous owners documented a title illegally, it carries over into the status of the property and requires resolution.
A lien is the legal right of a lender to sell an individual’s property if they fail to fulfill contractual or legal obligations. Businesses, the government, and financial institutions can issue loans. Having liens against your property prevents a clean title and can seriously affect your closing process. Paying off the debt in full is the only way to remove liens. There are four frequent types of liens that have the potential to jeopardize a clean title.
4 main types of liens
If the owner doesn’t pay a contractor for services, the provider can place a mechanic’s lien on the property. Many different service providers hold the right to place a lien, including construction companies. If this lien is placed on a home, it is the owner’s responsibility to pay the charges to remove the lien. If they don’t, property could be auctioned off to pay the lien holder. Any property with a mechanic’s lien against it won’t have a clean title until the owner pays their debt. For more information, check out these 5 facts about mechanic’s liens.
When an individual takes out a loan from a bank to purchase an asset, the bank grants a lien on the asset. This gives the bank access to the purchased asset in the case of missed payments. Once the individual repays the full loan, the bank releases the lien- one of the steps necessary for a clean title.
Real estate lien
Like a bank lien, this grants the legal right to seize and sell real estate property. In the case of an unfulfilled property contract, the lender can place a real estate lien.
Tax liens are created by law rather than by contract. They are extremely common in taxation, as authorities are allowed to put liens on properties of delinquent taxpayers. The Internal Revenue Service may place a lien against a taxpayer’s property if they don’t pay their owed taxes. It is important to address any tax lien on a property to ensure a clean title.
Correcting title issues
During the closing process, title companies and real estate attorneys will help resolve any property title issues.
First, a title company typically conducts a primary search on the title of the property to ensure a legitimate title with no issues. The title search includes drawing upon all documents associated with a deed, like public records. This is necessary due diligence to uncover any issues that could get in the way of a clean title.
In addition to enlisting the expertise of a title company, you may need a real estate attorney to address specific title issues that can impede the closing process. An attorney will address problems with liens, ownership, boundary disputes, and more. Furthermore, they can re-file public documents if they find any errors. These actions are key to a clean title.
Finally, title companies provide title insurance. Title insurance acts as protection against title issues in the future, protecting the buyer from any losses associated with property title issues. There are several misconceptions about title insurance, and it is important to properly understand the benefits it can bring to your closing process. If the work of the attorney or title company falls short, this insurance protects the buyer from any undiscovered issues and saves a lot of money. Read more about the benefits of title insurance here.
Whether you’re in the market for buying or selling a home or involved in the closing process, Landmark Title can help. If you have questions about the closing process or on the specifics of a clean title, contact us.