One of the most important, and unfortunately, often times overlooked steps in any real estate transaction is the title search. If a thorough title search is not performed, it is possible that weeks, months, or even years after the closing, a significant issue will be discovered. If this occurs, it can cause major legal problems for you, and could even cause you to lose the property. While most title searches find nothing wrong, the following are five big issues that can, and do, come up in some situations.
Many people think that once they buy a piece of property, it is theirs free and clear (other than the mortgage). The fact is, however, that existing liens from the previous owner may still be in place. Banks and other financing companies can legally put a lien on your property for unpaid debts of the previous owner. This is one of the biggest concerns that people buying distressed properties should be aware of before closing any deal.
When a homeowner passes away, the title of the home typically passes on to whoever was listed in the will or other documents. In some cases, however, there is no will or it can be contested. When this occurs, the ownership of the home may not be known. If the presumed owner sells the home, but then another claimant says they had the right to the home, it can cause significant legal issues. A title search can identify potential inheritance issues so that they can be addressed before closing on the property.
An easement is a legal right of way on a piece of property. For example, a neighbor may have a legal easement to a driveway on your property so they can get to theirs. If there is an existing easement recorded on the property, it is likely considered a covenant that “runs with the land” and is passed on to the new owners. Title searches can identify all easements so they can be terminated (if necessary) or at least so you are aware of them before making the purchase.
False or Inaccurate Documentation
Titles are legal documents and they must be filled out and completed legally per state law in order to be valid. If the previous owner (or any owner in the past) put false information on the title (for example, a “wild deed”), it can cause problems for you. Even if the false information was simply a clerical issue, it needs to be fixed before the deal can move forward or it may cause issues in the future.
Most real estate has been owned by many people in the past. Having a clean chain of ownership is very important. If, for example, the property was previously owned by a non-existent entity, or a person who was a minor when they bought the property, it can cause issues with the enforceability of the deeds or transfer of the property. Learning about these issues now can allow you to get them addressed (or back out of the deal) before they cause you trouble.
Always Opt for a Title Search
When purchasing real estate, it can be tempting to opt out of a title search – for example, investors often are tempted to consider doing so just to save a little time and money. In that case, the axiom “Buyer Beware” takes on major significance. In reality. this is a big mistake that could end up costing you a significant amount of both time and money down the road. If you would like to have a title search performed on the property you’re interested in and your commercial or residential real estate transaction by the legal team watching out for ”your interests,” please contact us to get the process started.