Buying a new home, especially if it’s your first purchase, is such an exciting experience. However, every home has a story, which may affect your purchase. Title problems at closing are among the most common issues most mortgage and cash home buyers in Texas struggle with.
For instance, a property having more than one owner, easements, and other legal and private factors can significantly delay your closing.
It’s better to deal with the problems from the start. Working closely with an attorney and conducting a thorough title search and survey on the property before closing will save you unnecessary boundary headaches later. Also, checking to ascertain that the tile deed is clean and not tied to any lien and correcting any wrong entries on the document will ease the process.
However, that’s not to say that you’re stuck with the title problems at closing if you discover them late. Getting the correct information will help you find a workable plan to solve the issues and prevent them from erupting again. This article looks at the most common title problems at closing and how to solve them.
Got Title Problems at Closing? Here’s What You Need to Know.
Common Title Issues You Need To Watch Out For
Title problems at closing are the last thing any home buyer would wish to experience. But they come up, especially if you didn’t spare time to check the condition of the title and solve the issues before committing to the purchase.
In most cases, problems barring the transfer of a title from the seller to the buyer are related to two issues—fraud or mistakes. Issues like wrong boundaries, liens, and easements are things you can solve by conducting a proper search and survey.
Here, we discuss some of the most common title defects you should look for.
Chain of Title Document Errors
Properties change ownership every time a purchase occurs. The property registry keeps all these changes in the record for personal and legal uses. The chain of title is the document that contains this record. It acts as a timeline displaying all the transactions relating to the property, starting from the first proprietor to the one selling it to you.
Apart from the previous owners, the chain of title also documents all recent information affecting the property’s ownership. These include liens (both voluntary and involuntary), easements, vesting deeds, and any financial documents.
An error in the chain of title documents can bar you from completing your property purchase. Thankfully, it’s an obstacle you can quickly solve during your search or even when closing. Your title company will check out the document to ensure no issue.
Even without the title company, visit the appropriate public record office and check the document to ensure no errors.
While a chain of title documents contains a lot of information, these two are the most common issues that will likely affect your closing process.
Vesting Deed Errors
Vesting deeds, sometimes referred to as transfer documents, are the legal forms that consign property ownership from the previous owner (seller) to the buyer or grantor to the grantee. Errors in this document, including a legal description of the property, misspellings, or incorrect names, are among the title problems home buyers face at closing.
Similarly, the seller should work through the title deed to remove any co-owners who no longer have a right to the property. For instance, follow the proper procedures after the death of a co-owner whose name appears on the deed or a divorced partner to legally transfer the ownership before completing the real estate transaction.
Missing Mortgage Assignments
Mortgage assignments are among the essential financial documents that should appear in the chain of title documents. It’s among the voluntary liens that indicate the transfer of a mortgage from the initial borrower or lender to a third entity.
It documents the agreement between the creditor and lender to borrow funds and buy the home.
In other words, mortgage assignments indicate which creditor owns the dues on a property loan, significantly if the initial lender confers their interest to a new financier. As a result, the lender remains the authorized owner of the home until the borrower pays the mortgage in full. Afterward, the initial lender resumes ownership of the property.
The chain of title documents should indicate all this information. Any irregularities in these documents can significantly impede your closing process.
Recorded liens are another bunch of title problems at closing. These entail legal claims against a property. They can be a security against a debt, tax obligations, or contractors. For instance, if the homeowner took a loan and placed the property as a security, the court places a lien to bar the sale of the parcel until the creditor recovers their debts.
Also, a contractor can legally place a mechanic’s lien on a property if they didn’t receive their pay after completing any work on the home. That way, you can only transfer ownership of the property once they receive their pay in full.
Other types of recorded property liens include property tax liens resulting from not paying property taxes and income tax liens resulting from a failure to pay Internal Revenue Service (IRS).
Liens remain with the property and not the owner. Thus, they can become your responsibility to clear if you purchase the home. The situation becomes even trickier if the property’s previous owner’s names are similar to someone else and the court mistakenly places the liens.
Work with a reliable title company to help you solve the issue upfront to avoid any irregularities. Buying or Selling a house without a realtor may be easier, especially if it’s not your first time. However, involving an attorney and title company may save you a lot of stress.
Boundary discrepancies are also common obstacles for home buyers at closing. They occur when the details of the property’s legal description differ from the property lines. Also, irregularities in earlier surveys can cause title problems at closing.
These boundary disputes often lead to conflicts among neighbors or government entities. To avoid the obstacles, ensure you conduct proper surveys before closing.
Above are the three most common issues that often lead to title problems at closing. However, they are just some obstacles home buyers often face during home purchases. Other issues that will likely cause title problems at closing include:
- Illegal deeds– includes all the illegal information and entries the chain of title may contain. For instance, if the property owner illegally documents their deed, like in case they had yet to attain the correct age or are immigrants. There are also cases of people claiming to be who they’re not to sell a property illegally.
- Errors in legal descriptions– any error in the public records may cause title problems at closing. These include filing errors or missing information.
- Easements– refer to the rights other parties possess to put a part of the property into use—for instance, those allowing utility companies to install things like sewer lines or electric lines.
What To Do If You Come Across a Title Error
Encountering a title problem when you’re almost done with your home-purchasing journey can feel overwhelming. It leaves you wondering how hard to sell a house is. However, it’s not the end for you, as there are some steps you can take to solve the title problems. Here are a few measures for you.
Involve a Reliable Real Estate Attorney
This should be at the top of your to-do list before you begin your home-purchasing journey. However, there is still time to work with one. A reputable real estate attorney will advise you on the legal process and give tips to effectively pull you out of the issue.
Their vast knowledge of the local property laws makes them the best people to trust to guide you through the legal process. Also, they can help you re-file the legal documents to correct any errors and hasten the process.
Involve a Title Company
A title company is another excellent entity to invite to help you overcome the obstacle. Title companies excel in researching properties to ensure the title has no defects. With their title insurance policies, investors can secure the properties to avoid any issues erupting in the future.
Talk to the Seller
Issues such as recorded liens and other property debts are a burden belonging to the seller. However, they’re legally transferred to you when you purchase the property. Before closing the purchase, you can talk to your seller to pay off all these debts and solve the title issues.
Push the Closing to a Later Date
While it may be tempting to buy and sell a house fast in Dallas, delaying the closing could be your best option here. It’s better to solve the title issues now than close the purchase and endure a lifetime of legal and financial battles resulting from errors. The extra escrow costs don’t compare to the ultimate financial losses if you skip this step.
Title Problems at Closing: Final Thoughts
Title problems at closing can be a real pain for those purchasing properties, especially given the extra escrow charges. However, having the correct information offers an efficient way to get through the process smoothly. You can also avoid the issues arising later by involving a reputable title company and real estate attorney from the beginning of your home purchase journey.
Does this all feel too exhausting for you? We buy houses. Arlington has an excellent solution for you. Contact us to find out how we can help you skip the hustle and tussle of dealing with title problems at closing.