Stop me if you’ve heard this one, “there was a lien on the title that had to be addressed.” Believe it or not it happens with a high degree of regularity. A surprisingly large number of all real estate transactions have title issues that need to be cleaned up before the property can be transferred to the buyer.
Buyer be ware is not a statement to be ignored when buying real estate. When you purchase a property how can you be sure that the “owner” has the right to sell, do people have judgments and liens against this property. Is the title of the property clear and free of defects. HOW DO YOU KNOW???
Title companies do very detailed work, to clear up the defects and blemishes on the title. Title companies will research public records, investigating issues that go back several decades and sometimes more to look at the past deeds, transfers and other issues related to the property including tax history and judgments by the court. All of there research is in an effort to address all title defects that may be outstanding and delay your close.
ALL title issues must be resolved before the title can be transferred to the buyer. The preliminary title report that is given to the buyer, seller, closing attorney and lender shows the results of the research.
The most common defect is a mechanics lien. Contractors that do work on a property will sometimes put liens on a property before or after doing a job to ensure payment for work done. However, if they put the lien on the property prior to the work being done, make sure you get them to properly remove the lien immediately upon payment, otherwise it becomes a defect when the property gets sold. If the lien is placed on the property after completion, due to failure to pay, then the lien will follow the property until it is satisfied or the property is sold. In some cases a lien can expire, however, it could also delay your closing.
Here in the Commonwealth we have specific laws the govern liens and blemishes to titles. These laws address a wide variety of issues that include the order in which the liens are paid. It is also important to know that these laws are mandated by the states and there fore will vary with neighboring state.
Past bankruptcies can create issues as well, particularly when a property has multiple owners. If there are any owners with bankruptcy issues that have not been discharged then the court has to be petitioned to release the property from the bankruptcy.
The list of possible issues continues and includes unpleasant things such as liens for child support and spousal support, individuals forgetting to sign releases when these liens have been satisfied and of course co-owner or spousal fraud/false signatures. Some issues are not as unpleasant but highly time consuming. In the case of a will where property is transferred to beneficiaries who also may have passed or are living abroad, with hard to find contact information, you may really be in a bind, when selling the property.
Issues like these are rarely quick fixes and can take weeks or even months in some cases to resolve. Most all of these issues can be resolved. If you research the process on line you will further understand the forms used and you can even Google the list of possible title issues and find resources.
However, in the end, patience, title insurance a good closing attorney and title company will get your closing completed smoothly and for the most part on time. There a some issues that you can’t avoid and there will be times when you will need be involved. But most of the time title companies deal with these issues in every transaction and most buyers and sellers never even know. And that’s why these professionals are a necessary part of all real estate transactions.
