Along with facilitating the real estate closing process, one of the central roles of a title company is to run a search for title defects surrounding a property. A title defect, also referred to as cloud on title, is any factor that interferes with or prevents the proper transferal of property ownership from one party to another. Title defects may occur in various forms and generally impede the closing proceedings until resolved. To identify such irregularities, a title search is carried out by a settlement professional prior to closing. Read on to learn about some of the most common title issues and how resolution might occur to allow the real estate closing process to move forward.
Common Title Defects
Title defects can encompass a wide range of factors. However, some of the most common include:
-Unreleased deeds of trust
-Errors of omission/recording errors
-Forgery or fraudulent claims to property
-Missing or unknown heirs
-Incorrect probation of wills
-False claims of marital status
How Are Title Defects Resolved?
In order to close a loan on and take ownership of a property, the title must be rendered free and clear. The resolution approach for addressing defects identified during a title search depends on the type of cloud on title that has been identified. In some instances, such as recording errors, it is simply a matter of filing the correct information with the local government recording office. Other types of title defects, like mechanic’s liens, are absolved by financial means, or bringing a delinquent account up to date. Title defects may present more difficult circumstances, in some instances, and may require legal proceedings to resolve. An example of this type of defect might include undisclosed heirs or property/boundary disputes.
Safeguard Against Title Defects
While title defects are a blip in some real estate transactions, homeowners can help mitigate the risk of property or financial loss by purchasing Owner’s Title Insurance at the time of closing. This type of indemnity policy can remunerate the owner for certain costs associated with defending title or resolving title defects weeks, months, or even years after closing.
For more information on title defects, title search, or the benefits of title insurance, contact the experienced team at Linear Title & Escrow.