What happens if the property I’m buying has a problem in the title search?
What you’ll learn (TL;DR)
If you’re buying a home, your title company will complete a title search for the property so a policy of title insurance can be issued.
A title examiner reviews the property’s history to determine who owns the property and if there are any title problems.
If the title search reveals errors, title professionals work to resolve them before you purchase the property.
Some issues are simple to resolve, but others may be more complex. It is unlikely that a title defect will cause a delay or cancellation of the sale.
The Title Search Process
If you’re buying a home, your title company will complete a title search for the property to prepare the
title insurance policy that will be issued to you after purchase. This involves a search of the public land records, where deeds and other documents that affect property interests are filed. A title examiner reviews the property’s history to determine who owns the property and if there are any title problems like deed errors, missing owners, or liens.
A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.
When a Title Search Reveals Defects
If a title search reveals errors, title professionals work to resolve them before you purchase the property. Title companies spend an average of 22-45 hours to close a transaction, depending on the difficulty.
[1] This includes the work to research title and fix any issues identified. Title companies estimate that 36% of transactions are “difficult,” meaning they require significant non-routine efforts to clear title. [1] The majority of the fee paid for title insurance goes toward these upfront expenses. [2]The title company’s work is often done behind the scenes so you will likely never even know there was a problem. Some issues are simple, for example, liens
A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.
can usually be resolved by the seller paying the amount that is owed. Others may be more difficult, for example, if the title company discovers that the seller’s deed is defective because it was not signed by all prior owners of the property. A title professional may try to locate the missing owner to sign a deed to fix the issue. Some problems may require a lawsuit to resolve. Complex or time-consuming title defects may delay your purchase, but this is unusual. A severe title defect may result in cancellation of the sale, but this is even more unlikely.
Title Insurance Protection
There may be issues affecting your property that cannot be found in the public records that you do not discover until long after you move into your new home. For example, there may be documents that were not found in the title search because they were filed against the wrong property, or a deed may be invalid due to fraud. Title insurance protects against these hidden defects and more, providing peace of mind to homeowners.
References
