“In almost all real estate transactions, there are title issues that must be cleared up in order to transfer ownership of the home from the seller to the buyer. Does the seller have the legal right to sell the property? Is the home’s title free of “clouds” or “defects” — such as judgments, liens or bankruptcies — that would prevent the seller from transferring “clear” or “marketable” title to the buyer? How can you be sure? Title companies report that in more than one-third of all real estate transactions they must undertake “extraordinary work” to address title issues. The title company will examine public records — often going back 50 years or more — to look for past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments and tax records that may be defective or outstanding” (The Washington Post).
Even if it seems small and insignificant, any sort of title issue will need to be resolved before there can be a clear title to offer to the buyer. The results of the title search will be compiled in an initial title report that will be given to the buyer, seller, real estate agent, lender, or attorney who may be involved in the transfer of that particular property. There are many situations where something may be wrong with the title and it may need to be addressed before the buying and selling negotiations can wrap up- these include but are not limited to the following title lien situations:
Liens for Work Done but Not Paid For
Mechanic’s liens are one of the most common liens you will find on property. They are placed on the property before any renovation, remodeling, additions, or extensive work is done. It’s a way to help protect the contractors working on the property to ensure that they will get paid. Once the job is complete and all payments are made the lien is supposed to be released from the title. Sometimes this does not happen for one reason or another. Or the payments were never made so the contractor has a lien on the property still in an attempt to get the money they are owed. Most mechanic’s liens do not have an indefinite lifespan and will expire if not acted upon in the prescribed amount of time. This is good but it means you need to check and see if there is this type of title lien present and if so how long it has left and what can be done to satisfy it so the lien can be removed.
Liens Stemming from Bankruptcy
Bankruptcies are another very common source of liens on the property and are a major cause of title issues. The can play out in many different ways. In on situation, a seller could have bought the piece of property while they were still single, and then married someone who had just recently filed for bankruptcy. The title company would have to check and make sure that not only did the new spouse sign the deed, but that the bankruptcy case was discharged. If not, it then becomes necessary to petition the court to have them take steps in order to release the property from the bankruptcy process. This can be a long and involved process which is why having trained and experienced title search experts in your corner can make all the difference in the world. If a bankruptcy is involved in a title transfer it is important to make everything is in order and taken care of ahead of time.
Child Support Payment Liens
Another common type of lien that can show up during a title search is one that occurs when a divorced spouse doesn’t remove a lien for child support. This could happen even if the debt was paid and the child support lien paid off decades earlier. A child could inherit his father’s house and decide to sell the property. If the mother put a title lien on the house in an attempt to get back child support payments that she was owed and never took the lien off, it would still be attached to the house title. The child would need to get his mother or father or both to sign what is known as a “release of judgment” which is a legal document that states that the debt has been paid in full. This is necessary in order to clear the title so the child can then inherit the property without the burden of that lien. This is more common than people realize especially with the high divorce rate today.
Liens Placed for Taxes Owed
Title liens for delinquent taxes are also common. The American Land Title Association recently found that fraud and forgery issues are also more common than they were ten years ago. A typical spousal fraud issue often arises when one spouse forges the signature of the other in order to sell a piece of property that they both help in joint ownership. It’s similar to when a spouse signs a joint tax return without the other spouse knowing and without them being aware of what expenses they are responsible to pay for. Delinquent taxes can lead to a title lien when the IRS seeks to get tax money it is owed from the sale of the property in question. This could come from an intentional failure to pay required property taxes but could also come from fraud cases where one spouse was not aware they needed to make payments or that something was wrong with the property title.
Get a Professional Title Search
If a buyer or seller is not aware of potential issues with the property title, it can come back to haunt them later on or can greatly delay the process of closing and finalizing the sale. Title companies do most of their remediation work behind the scenes and may even be able to detect and deal with issues without any significant amount of work on your part. This is why it is important to do an official title search with a professional title search company as soon as possible in the process of buying or selling a piece of property. While a title search is a vital piece of the puzzle and is something that must be included in the process, it is not a foolproof method of checking for issues. Some marks and title liens cannot always be detected by an initial title search and can creep back in years after the property title has changed hands.
A title insurance policy will be your best protection against these and any other title issues that might not be detected by an initial title search. The cost for the policy is a one-time fee and will be in place for as long as you own the title and do not sell it or pass it on to anyone else. However, one of the requirements to get title insurance, you’ll need a complete title search conducted by a title company. So, call True Title today and let us help you with our state of the art in depth title search! Let us help protect you and your investment into your future. Call us today for a free consultation and let us answer your title lien questions and get you started on the right path!
