In any real estate transaction, one of the key steps toward closing is the title search. Its purpose is to make sure the seller owns the property and also to discover any problems or competing interests that might encumber the seller’s right to sell. Title defects, whether due to third-party claims, flawed records or fraudulent acts, must be rectified so that the property can be sold free and clear.
Title companies examine public records for prior deeds on the property, divorce decrees, wills, bankruptcy filings and other potential clouds on ownership. Issues requiring substantial corrective work arise in about one-third of all title searches. Here are 10 of the most common ones:
- Title deficiencies — The title search could reveal an illegal deed in the chain of title. For instance, a deed could have been issued by a minor, a mentally incompetent person or a married person who falsely claimed to be single.
- Forgeries and fraud — Land records may include transactions based on forged or fabricated documents or on false impersonation of a property owner.
- Errors in public records — Mistakes in entry of deeds or other property interests could affect the search results.
- Home equity loans — Second mortgages and other security interests may be of record, either because the loans are outstanding or because no satisfaction of mortgage was ever filed.
- Mechanics’ liens — Contractors who perform work on a property can file a lien to ensure they get paid. Sometimes a contractor neglects to file a satisfaction of the lien.
- Child support or alimony claims — Divorced spouses may file liens for unpaid child support or alimony payments, which may still be of record even if the debts are satisfied.
- Tax delinquencies — Unpaid taxes, including interest and penalties, become liens and also subject the property to possible foreclosure.
- Missing heirs — Ownership of a property may be challenged by heirs of a deceased prior owner, claiming rights that were not asserted at the time of that owner’s death.
- Easements and restrictive covenants — There could be rights of way for public or private use or contractual restrictions on the property, such as building limitations.
- Boundary irregularities — Property surveys may also show misplacement of boundary fences and other inconsistencies concerning property lines.
Title insurance companies issue policies only for the real estate ownership interest that can be conveyed, which means they will carve out exceptions for any title defects not resolved. Most clouds on title can be removed by showing proofs of satisfaction of financial claims on the property, by proving authenticity of the seller’s ownership or by correcting errors in records. In the event of disputes with third parties, negotiation or even litigation may be required.
Hayes, Berry, White & Vanzant, LLP represents buyers and sellers in all aspects of Texas residential and commercial real estate transactions, including resolution of title defects. Call us at 940-230-2386 or contact us online to make an appointment at one of our offices, located in Denton, Flower Mound, Gainesville and Celina.
