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3 common title issues that can impact real estate transactions

On Behalf of | Mar 29, 2024 | Real Estate Transactions |

A title search is a necessary part of a residential real estate transaction. Particularly when there is a mortgage involved, title insurance policies are mandatory. Before the transaction takes place, it is first necessary to review the title record for the property to ensure there is a clear title.

Occasionally, the title search process may turn up defects that prevent the transaction from moving forward as planned. Issues with title can leave lenders unwilling to finance the transaction and buyers incapable of establishing official legal ownership of a property. For example, the following title issues often complicate, delay or prevent residential real estate transactions.

Old owners showing up on record

The party listing the real estate sells their interest in the property. If there are other parties who also hold an interest in the property, they may also need to execute a deed or may retain an ownership interest. Sometimes, title records show old owners who have died or lost their interest due to divorce. Other times, fraud could be to blame. An outside party on title could derail a pending transaction.

Unresolved liens

Having one or two liens against a property is relatively common. Many people have mortgages and may have either a second mortgage or a home equity line of credit that uses the property as the collateral for the loan. There is special language included in closing documents to ensure the payment of those liens as part of the transaction. Other liens, such as a mechanic’s lien held by a construction company, could lead to issues securing title insurance. Sellers may need to prove that the lien is invalid or that they have already resolved the debt associated with that lien.

Problematic easements

Outdated or concerning easements are relatively common defects. Some people may have acreage that they effectively cannot use because of the utility company easements, for example. Neighbors could potentially have water access rights or an easement allowing them to cross someone’s property. Easements can complicate financing in some cases because they affect the value and use of the property.

Sellers can sometimes address title defects, but at other times they may be unable to complete a planned transaction. Those preparing for residential real estate transactions may require help when reviewing the title record for a property or drafting documents that protect them if the transaction falls apart.