The term “title” in real estate refers to the ownership aspects of a property. Title defects are any problems or issues that affect the ownership rights or transfer of a property. Left unresolved, these factors can create complications with the real estate sale and may even stall the closing process.
Some of the more common title defects in real estate include:
- Liens: Liens are legal claims against a property for unpaid debts or taxes. Liens can be placed on a property by a lender, the government, or a contractor.
- Encumbrances: Encumbrances are any burdens or restrictions on a property’s title, such as easements, covenants, or deed restrictions. These can limit the property owner’s use of the property or affect its value.
- Errors in public records: Errors in public records, such as mistakes in property descriptions or recording errors, can create problems with a property’s title.
- Unknown heirs: If a property owner dies without a will, their heirs may not be immediately apparent. This can create complications when attempting to sell or transfer the property.
- Forged documents: If any of the documents involved in a property’s ownership or transfer are forged, this can create a cloud on the property’s title.
- Invalid deeds: A deed that is improperly executed or not legally binding can create a title defect.
- Boundary disputes: Disputes over a property’s boundaries or ownership can create title defects.
- Unreleased mortgages: If a mortgage has been paid off but not properly released, it can create a lien on the property.
- Missing interests: A property’s title may be incomplete if there are missing interests, such as an owner who was not properly included in a previous transaction.
It’s important to have a thorough title search conducted to identify any potential defects before purchasing a property.
How are title defects found?
Title defects can be found in a few different ways, depending on the circumstances. Here are some common methods:
- Title Search: A title search is typically conducted by a title company or an attorney to identify any potential issues with the title of a property. This search generally involves a review of public records, such as deeds, mortgages, liens, and judgments, to ensure that the title is free and clear of any encumbrances or defects.
- Survey: A survey of the property can also help identify potential title defects, such as encroachments, boundary disputes, or easements that may not be reflected in the public records.
- Property Inspection: A physical inspection of the property can also help identify potential title defects, such as unpermitted structures or improvements that may impact the title.
- Disclosures: In some cases, title defects may be disclosed by the seller or other parties involved in the transaction, such as a homeowner’s association or government agency.
- Title Insurance: Title insurance is designed to protect against losses arising from title defects. As part of the title insurance process, the title company will typically conduct a title search to identify potential issues with the title. Title insurance can provide coverage against losses resulting from those defects.
What happens when a title defect is discovered?
When a title defect is discovered, it can potentially have serious consequences for the ownership and sale of the property. If a title defect is identified, one or more of the following may occur:
- Resolution of the defect: Depending on the nature of the defect, it may be possible to resolve the issue by taking corrective action. For example, if there is a lien on the property, the lienholder may agree to release it upon payment of the debt.
- Negotiations: If the defect is significant, it may be necessary to negotiate with the other parties involved in the transaction to determine the best way to proceed. This may involve renegotiating the terms of the sale or working out an agreement to resolve the defect.
- Legal action: In some cases, it may be necessary to take legal action to clear up the title defect. This could involve filing a lawsuit to quiet title or challenging the validity of a lien or other encumbrance on the property.
- Title insurance claim: If the defect is covered by title insurance, a claim can be filed with the title company to cover any losses resulting from the defect. The title company may take steps to resolve the issue or provide compensation to the owner for any losses incurred.
- Sale delay or cancellation: If the title defect cannot be resolved, it may be necessary to delay or cancel the sale of the property. This can be frustrating for all parties involved, but it is important to ensure that the title is clear and that ownership of the property is properly transferred.
For more on title defects or how these issues might be resolved, please contact Linear Title & Escrow in Virginia Beach, VA today.