Congratulations on the important decision to buy a new home. By now, your real estate agent has most likely discussed your need for title insurance for the closing process. Title insurance protects your interests and the interests of your lender should a title problem arise. If you've been wondering what kinds of title problems can occur, then we've got you covered with our list of 10 common title problems.
1. Errors in public records
Your title insurance company will perform a title search before issuing their insurance policy. An error in public records is a common issue that arises from clerical or filing errors. Any errors found could cause a problem with the title transfer.
2. Illegal deeds
Illegal deeds are deeds signed by those ineligible to sign. Examples of illegal signers are minors, undocumented immigrants, those of unsound mind, or a homeowner who signs as a single but is really married.
Forged or fabricated documents in the chain of title can be an issue for you at closing. Your title insurance company should do a thorough search before your closing date.
4. Boundary disputes
Any boundary disputes on your property can cause a title problem. Neighbors or other parties can claim ownership to part of your property and claim that the boundary lines need to be moved.
5. Undiscovered encumbrances
An undiscovered encumbrance occurs when a 3rd party lays claim to your property due to a former lien (debt), a restriction on building or remodeling, or a contract. The title cannot be transferred until this is resolved.
6. Existing liens
A lien is put on a property when there is an unpaid debt in the owner's name. Liens can be put on a property for unpaid property taxes, unpaid homeowners association dues, unpaid contractor bills and other unpaid debt.
7. Probate issues
Any probate issues from a previous owner's death can cause a headache for closing. Probate issues arise when a missing or undiscovered heir (someone who was possibly unknown to the rest of the family) discovers the sale and lays claim to the property.
8. Breaks in the chain of title
Your title company will do a thorough search and trace the title transfer from the very first owner to your seller. Any missing links in the title documentation is a red flag. A break in the chain of title can be caused by missing documents or clerical errors.
9. Foreclosure issues
When an owner forecloses on a property, the owner may lose the property but not the title. It is up tot he lender to notify all parties of the foreclosure. In the case that the lender fails to notify all parties, a problem with your title may occur.
10. Off Record Interests
Off record interests are the least common title problem. This scenario happens when a person or legal entity has a say in the sale of the property but is not the recorded owner. An example of this is a separated couple. If the husband purchased the property when single and never added his wife to the title, he is the only recorded owner. If the couple separates and does not divorce by closing, the wife could have an off record interest in the property even though she is not the recorded owner.
When it comes to closing, there are numerous problems that could occur with your title. Purchasing title insurance will ensure peace of mind throughout your closing process. Twin City Title is here to help both lenders and home owners with their title insurance needs. You can get started by using our title insurance calculators or ask a question through our contact form.