Little bad news can be as hard to deliver to a prospective homeowner as, “I’m sorry. The property you wanted is not eligible for purchase due to title issues of which we were previously unaware.” For the real estate agent who was counting on closing a sale, this news can be almost as devastating for you. By learning to recognize title issues on the properties you show your clients, you can save all parties involved a tremendous heartache and win the gratitude of your client. Let Trustworthy Title show you how.
Title Issues to Watch Out For
Every property transaction has a history, and the longer a property has been developed, the greater the potential for title issue complications. These are some of the most common ones.
- Unresolved Debt
If the previous homeowner acquired- and failed to pay- his debts while the property belonged to him, banks, the IRS, collections agencies, or any other entities to whom money was owed may have placed a lien on the property. These liens are both bad news for the prospective buyer, who may not qualify for a loan until the debts are paid by the seller or may find themselves picking up someone else’s debt just to move the transaction forward. Mortgage lenders rarely approve of loans when titles cannot be possessed free-and-clear.
- Illegal Deeds
If a person entered a property deed who was not qualified to do so, such as an illegal immigrant, a minor, or someone falsely representing himself or herself, the deed may not be valid, and thereby cannot be enforced.
- Inheritance Issues
Sometimes when a homeowner dies, the property is left to an unknown or unaccounted for heir. Locating the heir may be difficult, and then he (or perhaps they) will have to determine what will be done with the property. The terms of a will can also become the subject of hotly contested disputes with contentious heirs (or those who believed they should have been heirs). This can leave a property tangled up in court for months or even years.
- Easements
While on paper, the property appears to be one size, the property owner may not have full access to use the land, due to easements. Easements can be put in place for the city, utility companies, conservation areas, homeowners’ associations, and more, and wherever they exist, the property owner is limited in what he can do with the property.
- Contradictory surveys
If multiple surveys exist of a property, everyone involved will want to go by the one that is most advantageous to them, meaning potential headaches and tension with neighbors. Determining which one is legitimate and “official” can be a costly legal procedure, both in terms of time and money.
Most families looking to buy a home, have neither the resources or the time to gamble on the favorable resolution of all these issues and will be better off, for peace of mind and considerable financial savings, to look for a home that is available to them free and clear.
Ways to Spot Title Issues
Liens, property ownership records, and other documentation are all a matter of public record, so properties can be searched, and the results trusted with reasonable certainty. Armed with this information, you can guide your clients away from potential disappointments and undue headaches.
Your approach must be that of an investigator. Research thoroughly. Compare documents relating to the property and look for discrepancies or any unusual activity. Ask questions and persist in finding answers for them until every avenue has been explored.
At Trustworthy Title, this type of research is one of our specialties. We know how exciting it is for buyers to find their dream home, and how devastating it can be to have it snatched away from them because of issues with the title. We will deep-dive into the records for you and your client, working with you to make your client’s purchasing experience the best it can be.
Word to the Wise
Even with a diligent and reputable title company working for your client, title issues can pop up years after transactions have been completed. It is for this reason that very few mortgage companies will approve a loan without lender’s title insurance. As the name implies, this policy protects the lending company from financial loss should any issues develop later.
Equally important, but not required for home purchases, is the owner’s title insurance, which ranges in price from $500-$3500. This one-time cost protects the homeowner from losses and liability related to the title for as long as they own the property. Without it, your client could be held liable for previous owners’ debts, such as unpaid property taxes.
Title insurance comes with a few unique features. Unlike most forms of insurance, which try to prepare policyholders for future crises, title insurance protects homeowners and lenders from past actions that may be discovered. It covers ownership by others, forgery or fraudulent documents, restrictive covenants, liens and lawsuits.
Advocate for Your Client
As a real estate agent, you hold a special position of influence and trust with your clients, and your wisdom and counsel on properties, titles, and insurance carry great weight. It is therefore incumbent upon you to learn all you can about titles, potential issues with them, and how to guide your clients wisely. Let us help you- and your client- have a great home purchasing experience. Give us a call today.