What if a Search Uncovers Title Problems?

Whenever a home goes under contract for sale, there are a lot more parties involved than just the buyer and seller. Interested parties are the lender, which will send out an appraiser, and will order a title search, which involves yet another entity with an interest in the sale going through. Said title search is intended to reveal any defects or dynamics legally attached to the home to protect the buyer from purchasing a problem.

What many consumers don’t know is that about 1/3 of all pending real estate transactions find title clouds during a search. That’s not an insignificant figure and to make matters worse, those which are not found can be the source of buyer’s remorse and, a drain on the buyer’s wallet. That could lead to a real mess to deal with and become an unpleasant legal situation for not only the buyer, but the seller as well.

Common Problems Title Searches don’t Always Reveal

There’s a widespread misconception that a title search will produce every possible defect that’s appended in one way or another to the property. The fact of the matter is quite a different one, because a title search is based on public records, and what private people don’t make public stays private. Just because something is doesn’t mean it’s bound to be discovered, after all, that’s what the intent of keeping secrets are about.

“Before you buy a house, a search of public record will be made to discover if any claims or judgments have been filed against the seller that would prevent you from getting a ‘clear’ title to the property. But the title search may not uncover everything you`ll need to know. From public records, it’s possible to learn if anyone has sued and obtained a judgment against the seller. If so, any real estate he or she owns may become security for the debt, and the sale may not be closed until the judgment is either paid, released or disposed of in some way.” —The Chicago Tribune

Some of the most common problems which a title search does not typically uncover are undisclosed spouses, who have an interest in the property. There are sellers who have not legally divorced who try to sell off their properties in order to enrich themselves and keep the proceeds to themselves and away from their spouses. Undisclosed heirs are another potential problem lurking out there and it could be years for courts to find and assign heirs if the estate is intestate; or, if the will isn’t clear or heirs get into a fight. Fraud and forgery are other things which a regular title search might not uncover and then there’s the matter of clerical errors.

What to Do if a Search Uncovers Title Problems

If you’ve learned there are clouds on the title of a home, you’re likely to be disheartened regardless if you are selling or buying. Should you be a buyer, you’re out some money, time, and effort; and, the promise of a new future–at least for now. As a buyer, you can walk away and find another home that’s free of legal entanglements. However, if you are the seller, you’ve got a real problem on your hands and one that’s not going to go away on its own. Unless you want to pull your property off the market and just try and live with it, you’ll have to take action:

  • Hire a title lawyer or real estate attorney to handle the problem. While it will come with a cost, that money will dwarf in comparison to what lies ahead if the matter is not properly dealt with. As a seller, you could be hit with a lawsuit if the transaction goes through without full legal disclosure.
  • Contact the original owners and have them sign a quitclaim deed. If the problem is the original owners are still on the deed, get in touch with them and have them sign a quitclaim deed, and have that document recorded.
  • Contact the lender and have a deed of reconveyance executed. In some instances, the mortgage payoff doesn’t make it through the system and can pop-up in the search. A reconveyance deed will be the necessary fix.
  • Approach amicable parties and have them sign a quiet title action. This is a legal mechanism which gives a single party or couple rights to sell a home and will be an avenue to go to closing.
  • Payoff the liens. Far from being a popular option, but one that will get results, paying off any liens is another way of chasing away any title clouds. Sellers might not be enthusiastic about the cost, but it’s either that take the home off the market and deal with the issue another day.