It’s difficult to overstate the effort and stress that goes into finding a suitable property to purchase, then negotiating the price and applying for financing. When a sale falls through, it can be devastating for the time invested, the hopes dashed, and the pure frustration of having to start the process anew.
An experienced real estate attorney may be able to help you avoid the pitfalls of title issues, which commonly cause delays or derailments of successful closings. Understanding why and how title issues occur and what can be done to prevent them saves time, money, and aggravation.
Why a Property Title Is Important and What It Does
A title names the rightful owner of a property (the deed is the related document that is recorded at the county’s recorder office). Titles, which in Minnesota may be recorded under either the Abstract or Torrens systems, are a matter of public record. The abstract system requires more title research than the Torrens, which creates a new certificate of title each time a property is sold.
When property ownership changes, the title must be clear of unresolved claims, liens, or defects that prevent the new owner from legal possession. A title with issues that prevent its transfer is considered “clouded.” This is why title companies send researchers to the county recorder’s office to delve into a property’s chain of ownership and make sure there are no barriers to transferring the title.
Issues that often delay real estate closings:
- Liens and encumbrances. Liens are claims against a property for unpaid debts, often related to property taxes, mechanic’s liens for renovation work, judgement liens from civil lawsuits, or unpaid utility bills. These liens must be cleared before a title can be transferred to a new owner.
- Clerical errors. Mistakes on titles must be corrected before property ownership can be transferred. These can be as simple as a misspelled name, incorrect property description, or improperly recorded deed.
- Inheritance and estate issues. If the seller inherited the property there may be issues with unknown heirs or unresolved probate processes. An heir could show up and claim ownership, ruining the property sale. In this situation it’s imperative to require probate documentation or heirs’ waivers before completing the purchase.
- Boundary disputes and property survey issues. In older or more rural areas, historic survey information can differ from modern use, and disputes often arise over memories of where property lines are located.
Avoid this complication by ordering a survey early, with enough time to correct issues. Address encroachment, access rights, or easements before closing.
- Undisclosed easements or restrictions. Easements allow a third party access to use a portion of the property, such as a shared driveway or utility access. These may not be obvious until the title search, limiting the new buyer’s use of the property.
- Title fraud. While unusual, forged signatures or fake deeds are possible. These can be discovered by an extensive title search and often require a “quiet title action” to resolve.
- Early Title Research is Key. Starting title research as soon as the offer is accepted may prevent a long delay or cancellation of the closing.
What is Title Insurance and What Does It Do?
If title defects are found after a property transaction is completed, title insurance can cover any financial losses. Mortgage companies usually require this insurance but property buyers may get separate coverage to protect their own investment.
Closing the Loop on Property Titles
Reaching the milestone of property ownership is a significant accomplishment. Having a Waypoint Law real estate attorney available to advocate for you, review documents, and examine any title issues provides certainty that the process was executed properly. The peace of mind that comes with a successful property purchase is the confidence that every effort was expended to ensure the title was clear. Call for a consultation.