Title insurance is a mandatory part of most residential real estate transactions. While buyers do have the option of foregoing personal title coverage, they typically have an obligation to purchase a policy for their mortgage lender at the very least. Most people also want to protect the investment they make in the property, including their down payment.
Before a title insurance company issues a buyer’s policy or a lender’s policy, a thorough title search is necessary. Most of those searches are uneventful, but occasionally they turn up surprising issues. Those issues may require action on the part of the seller or outside parties before the transaction can proceed.
What are some of the title issues that might impact a residential real estate closing?
Unfulfilled liens
The most common liens recorded within the title history of an individual property are mortgages. Both primary mortgages and second mortgages or home equity lines of credit (HELOC) loans use the property as the collateral for the loan. If the seller did not already disclose and account for paying the lien in full as part of the transaction, there could be issues with the transfer of ownership. Sellers typically need to address liens before a transaction can proceed.
Outdated ownership records
Perhaps the seller divorced years ago and bought out their former spouse as part of that process. The seller may never have realized that their former spouse still shows up on the title record for the property. Deceased individuals can also sometimes turn up as current owners during a title search. If someone issued a fraudulent deed and tried to complete a real estate transaction, there could be unknown parties listed as current owners at the property as well. Deeds or court proceedings may be necessary to address outdated ownership records.
Legal description discrepancies or easements
The improvements on the parcel aren’t the only thing of value. The land itself and the ability to use it as the buyer wishes are also highly valuable. Sometimes, title research turns up issues with the legal description of the property. There might be discrepancies regarding how much acreage the parcel contains or where the boundaries fall. Other times, there might be easements on record that could impact the new owner’s use of the property. It may be necessary to execute deeds or even initiate quiet title proceedings in civil court to address those issues.
Understanding what issues might delay title insurance research and policy underwriting and a real estate closing overall can be beneficial for both buyers and sellers. Sellers usually need to address title issues before a transaction can proceed.