“We cannot close today as there two liens on record.” Unfortunately, this nightmare occurs more than most realtors and title agents care to admit. There are numerous (public) filings that can stop or even kill your real estate closing, yet most can be managed prior to reaching closing – ensuring your transaction is completed without undo-stress or complication.
If you want to avoid extending or even cancel your purchase or sale of a property due to title issues, you will need to arm yourself with the right information. Knowing what questions to ask and then gathering answers to those questions can make all the difference. To help you with this task, we created a helpful checklist to stay proactive on title concerns.
Schwartz Realty’s Proactive Title Checklist
- Does the seller have legal right to sell the property?
- Is the property’s title clean of defects?
- Have your completed your own title search at the County Recorder and/or Clerk’s Office?
- Do you need title insurance?
Does the Seller have Legal Right to sell the Property?
Starting with Question No. 1 from the SR Proactive Title Checklist, save yourself considerable time and limit wasted effort by simply confirming whether the seller has the legal right to sell you his or her property. If the seller does not have proper title, you must locate the individual, entity, or trustee that does. If this is not an option or proves to be more difficult than desired, it might be time for you to move on to another property.
Is the property’s title clean of defects?
After confirming that your seller has the legal right to sell, next you need to confirm whether the property has any recorded title defects. What are defects? There are countless examples, however there are three common types of defects that surface either at or before closing: (i) liens, (ii) bankruptcy, and (iii) divorce.
If you find that there is lien on the property, such as a mechanic’s lien(s) for unpaid work on the home, your transaction and transfer of property will not close until it (they) are satisfied. An example of a mechanic’s lien is when a contractor files a lien against the property in connection with an improvement to that property –generally filed prior to work commencing – which is placed on title to ensure payment is received for the services performed by that contractor.
In some cases the work is completed and payment is received by the contractor, however this contractor fails to take action to remove the lien(s), which may be a simple error. With such occurrences, you must contact that contractor and request that the lien be removed. Unfortunately this is easier said than done as this contractor may not be based in your area or may no longer be in business; possibly resulting in months of unnecessary effort to track down a professional responsible for the lien(s) in question at the 11th hour – further demonstrating the importance of discovering defects early.
Do you know if there is a bankruptcy issue? A common bankruptcy related title issue occurs when a single individual purchases a home, then shortly thereafter gets married to someone else that files or is currently in bankruptcy at the time of the transaction. Although the seller‘s finances do not directly affect your own, the sale of the property could require bankruptcy approval if the seller is still in bankruptcy at the time of the closing.
In this example, your transaction could be subject to your ability to successfully submit a request to the bankruptcy court, and request approval of the sale (which generally requires an attorney). If you or your title company are aware whether the these impediments to closing are resolved, you could avoid additional fees and costs relating to advisement on navigating bankruptcy court statutes.
Divorce can cause several complications with respect to transfers of property. In some cases, the forgetful actions of a spouse for outstanding child support or a settlement agreement coming out of a divorce could remain on title well after that financial obligation was satisfied. To remedy this type of defect you must confirm, in writing, via a release of lien/judgment, detailing that the debt was satisfied. Failure to get this issue resolved could prevent you from closing.
Another possibility arising with property and divorce is when a property is inherited by a family member. Often times, inheritances come with liens from one of the original owners (or former spouses), one that the seller of the property had no prior knowledge of prior to selling the home. Sadly, this unintentional lapse of information can result in the heir’s inability to possess legal right to sell their property – returning us to Question No.1 of the SR Proactive Title Checklist.
Completing your own title search
Generally, all reputable title companies will complete a very thorough title search once you enter into a contract to buy or sell a home and open escrow with that company, however, it never hurts to initiate your own search. In some cases, an additional search yields information that is either missed or even overlooked in an initial report.
Each state has its own processes to search and view public records, however, generally speaking you can access these records at your County Recorder or Clerk’s Office. Additionally, thanks to the ever-increasing reach of the internet, you may also have the option in some states to search records online. Check with your agent and/or title company to confirm the appropriate office to contact.
Do You Need Title Insurance?
Insurance is something you don’t want to pay for until you need it. In the first 3 questions of the SR Proactive Title Checklist, we focused on pre-closing items that could prevent a successful transfer of property. Equally important is what may arise post-closing. Spending time and effort ensuring you can close is important, but ignoring the possibility of a defect (lien)that arises after closing, and prevents you from occupying and/or later selling the property is not a desirable result.
Consulting with your agent and title company on your options, regarding potential benefits and costs for title insurance is another great example of protecting your investment via information. Even if you elect to decline this coverage option, exploring this offer could help you save you additional fees and costs as well as headache down the road.
Recapping – proactive consideration of potential title issues that might prevent you from successfully navigating your closing is a must. Moreover, knowing what questions to ask and the subsequent actions to take to be sure you receive clean title is equally paramount. Selecting an agent and broker who can assistance you in evaluating such aspects of your transaction is necessary for anyone who desires a clean transfer of ownership of a property from seller to buyer.
Our professionals can share details with you about potential pitfalls associated with your transaction as well as standard practices to avoid them – ensuring you properly navigate your transaction. At Schwartz Realty, we strive in helping you understand the best course of action and guide you through the process with ease. Let the some of the top realtors and agents in Las Vegas help you make the right decisions. For more information or to set up a consultation, give us a call today at (702) 485-1400.