There are many ways in which real estate can be acquired and disposed of. No matter how the ownership of the property changes, the question of whether the title is clean or clouded still occurs. A representative of the title insurance company called the title agent will determine the history of the property’s ownership by going through public records. The title agent will also look for liens that could have been attached to the property and other encumbrances that may be present. Once the title search is complete, an Abstract of the Title is created. An attorney then prepares an Opinion of Title, which may consist of coverage, qualifications, conditions, and limitations, all of which will be used by the insurance company to prepare the actual insurance coverage. The new owner or/and his subsequent heirs will be protected by the title insurance policy against consequential losses that may occur from future claims made by a third party. It is important that potential title problems be discovered during the title search and should be dealt with before closing.
Title problems tend to show up in many ways. Some common title issues are:
Errors In Public Records
The title owner could face huge financial strains due to public record errors. Filing errors, incomplete or missing documentation, negligence are all possible public record errors. Some other issues may come up such as witnessing didn’t conform to the requirements of the state, missing legal description of the property, the problems relating to the recording of the deed such as it was recorded out of the county, or without the required fee, or the deed was not properly indexed for searches. Inaccurate or faulty clerical records could hinder the survey of your property and cause a financial burden in order to resolve them.
One of the most common title issues are unpaid liens. During a title search, the title agent may discover many liens such as Home Owner Association fees and unpaid property taxes on a title. Such liens are not problematic as they are dealt with at the time of closing, keeping in mind both parties’ mutual interests. However, there may be liens that may exist but remain undiscovered. For example, a lien may have been paid off, but the transaction was not recorded, making it seem as current in the public records, or a lien may not be disclosed to the buyer. The title search is responsible to look for such possible scenarios.
Mortgage foreclosures can cause plenty of problems with the chain of title. In case of a defective mortgage foreclosure, the previous owner may not lose title to the property although losing his home. Even the simplest errors, such as lender failing to notify interested parties, failing to serve those parties, or failing to file a Lis pen dens, are considered foreclosure failures. An unsatisfied mortgage clouds the title. An assigned mortgage does not protect a new owner against a creditor unless that assignment is indicated in the title of the document itself. Investors should protect themselves by making sure the title search shows that any previous mortgage was satisfied, canceled or otherwise released in ways that really do avoid any future title problem.
Unfamiliar – or Uninformed – Heirs
In a scenario where the previous owner of the property has died, there is a possibility that you may be purchasing the property from his or her inheritors. In such an event, it is imperative to cross-check that every single inheritor has been notified that the property is being sold and there will be a new owner. If this is not done, chances are an uninformed heir may still have some legal rights to the property the new owner has bought.
Incorrect Legal Description
The legal description is what distinguishes one property from another. Hence, a faulty legal description of the record becomes an obvious title problem. Each time property ownership changes, legal descriptions are copied onto new records. A clerk typically copies the description from the previous document. A minor typographical error that may have been committed in one copy may be copied several times into subsequent documents. Such errors can invalidate the title. The error could deem the land legally nonexistent, or the inaccurate description could make it a duplicate of another property’s legal description. If the problem is not resolved, the new owner may have no legal right to what they thought was theirs. The examiner is required to check all references to the legal description, not just the first or latest one, and cross-check them to any mortgage documents and other legal records.
Breaks in the Chain of Title
During the title search, ownership of the property is traced from the current owner to the first owner, or in other words, the chain of title is traced. Each time the property is transferred, it adds a link to that chain. This could be by purchase, inheritance donation, or adverse possession. A missing link in the chain is a red flag. If not closed, there is a probability that someone could show up and claim full or partial ownership. Missing documents or errors in documents are commonly the reasons behind breaks in the chain. Old properties that go through many transfers may have changed ownership through poorly written documents or documents with typographical errors.
The mortgage closing is not a simple process. Neither is conducting a title search. That’s why it is important to let professionals help along the way to closing a deal. Here at Orchestrate, we specialize in Title Search and Mortgage solutions and would love to use our knowledge to help you. Our goal is simple; to provide you with the most seamless closing experience. Visit us at www.Orchestrate.com.