Almost all properties go through a title search before a purchase. It’s an intensive research process that deep dives into public records looking for information that would prohibit a sale. Title searches are looking into past deeds, wills, divorce decrees, tax records, and more. Clearing up title problems is more common than expected. The goal is to identify anything outstanding and have it cleared, so a sale of a property can take place relieving the new owner of a potential financial burden.
Title searches are thorough. But what do you do if you find a claim on a property?
The Most Common Title Problems
Let’s take a quick look at some common title problems that might occur if you own a property.
A mortgage lien on the property.
When you take out a mortgage, one is put on the home by the lender until it’s paid off. However, once the mortgage has been paid, some counties don’t automatically release the lien until a request has been made. Not many people know about this and might be one of the most common title problems.
Issues with a will.
Estate issues are tricky, and they present themselves in many ways. Someone could’ve died without leaving a will, and the will hasn’t been probated. Just a quick note, probate means that someone is legally attending to a person’s will. The probate process confirms that it’s valid and authentic. “Issues” can happen when the property wasn’t mentioned in the will and needs to be secured before a sale.
Another way you can have estate issues is if an heir is missing. Say a will was never made. Legally speaking, the property should be handed to kin. However, if they never find the sibling, cousin, or other family members the property can be settled and eventually sold. It has been seen, although very rare, that heirs pop up after a sale trying to stake a claim on a home.
Judgments appear on the title.
Credit card liens, tax liens, child support, and bankruptcy judgments are tied to a property title. If there is one out on a property, it will either prohibit you from selling or become your responsibility if you’re the new owner.
What could go wrong when filling out a title? A few. Sadly, clerical mistakes have been made in the past. A few examples could be an inaccurate legal description of the property, a poorly conducted survey, or a release that wasn’t filed correctly.
Placed against a property by a general contractor, this type of lien is often filed by the contractor, or whoever starts work on making improvements to the home. They submit it to ensure they get paid. Once the work is complete, the contractor should present a “satisfaction” of the lien to release the property.
What happens when there is a title claim against my property?
So, we have all of this information on some common title problems, but what happens when there is an actual title claim against the property?
That would depend on when the claim appears.
Most claims are caught during the title search. That deep dive into public records to find out more information on the property in question. A great title company will inspect records thoroughly, going back decades to ensure there aren’t issues with the title.
But, if that happens, what do you do?
Find a Middle Tennessee title company you can trust. You’d be surprised how many liens and judgments appear and are taken care of without the buyer finding out. Why? Cause while rare, they aren’t too complicated to fix before the sale is complete. Several title issues can be resolved by filing a:
- A quitclaim deed – this would be used in the example of an heir needing to be removed
- A release of lien – could be used to help eliminate child support or paid mortgages
- A deed of reconveyance – used to move payment of a mortgage to a deed of trust.
The process is pretty straight forward. And, any title company that has experience helping homeowners buy and sell real estate will have the expertise to get them resolved.
What happens when there is a claim after I purchase the property?
If the claim is brought to you after you’ve purchased the home, you have a few different courses of action that you can take. Often, they require the filing of some paperwork and, occasionally, the help of a real estate lawyer.
The first thing you should do is contact your title company. Together you can work through the next steps. Back taxes or those pesky mortgage liens we were talking about can slip through the cracks and present themselves at unforgiving times. But, if you found the right title company before you purchased the property, they would’ve helped you buy title insurance to protect you.
How does my title insurance policy protect me?
Title insurance is a form of indemnity insurance. It’s a “contractual agreement in which one party guarantees compensation for actual or potential losses or damages sustained by another party. Most commonly, it is an insurance policy designed to protect … owners when found to be at fault for a specific event such as misjudgment.”
You have two types of title insurance: owners and lenders. Lender’s insurance policies are usually non-negotiable when taking out a mortgage. It will protect the mortgage company from financial loss or burden if a claim creeps up. An owner’s policy is similar but bought by the seller of the house to protect the new buyer against any potential defects.
In some cases, both policies need to come into play. But, ultimately, it’s designed to remove the financial burden from falling on the shoulders of the buyer. Let’s put how the title insurance would work into a real-life scenario.
Property tax is something every Tennessee homeowner is going to have to deal with, and sometimes they aren’t filed correctly. Let’s say you buy a home and it appears after a title search everything looks fine. You complete the sale and reside in the home for the next 12 months. One day, you receive information that there are outstanding property taxes on your house. However, you’ve paid for everything and don’t understand the charges. After further investigation, it appears the previous owner failed to make payments. And, now there is a lien on the house. In the government’s eyes, the unpaid property tax must be paid by whoever currently resides in the home and on the property.
Title insurance steps in to help resolve the issue, cover the financial burden, and prevent you from losing your home.
Find an Experienced Title Company
We’ve talked about the Nashville real estate market in 2020. With mortgage rates dropping, there is more incentive to buy a house. However, don’t lose your dream home because of a defect. Hire an experienced title company to help with title searches and to get you a comprehensive title insurance plan.