The 7 Most Common Title Issues That Could Derail Your Home Purchase

Purchasing a home is a milestone that many dream of achieving. However, amidst the excitement, prospective homeowners often overlook one critical aspect of the process: the property title. The title establishes legal ownership of the property, but complications, known as title issues, can arise and jeopardize your purchase. Understanding these potential pitfalls is crucial to ensure a smooth transaction. Here are the seven most common title issues that could derail your home purchase and how to address them.

1. Outstanding Liens on the Property

A lien is a legal claim against a property, typically used as collateral for a debt. Typical liens include unpaid mortgages, taxes, or contractor fees. If the seller has unresolved liens, they must be paid off before the property can change hands.

How It Affects Your Purchase: If discovered during the title search, liens can delay closing or require additional negotiations. In worst-case scenarios, they could invalidate the transaction.

Solution: Work with a reputable title company or attorney before closing to conduct a thorough title search. They can identify liens and ensure they’re resolved before proceeding.

2. Errors in Public Records

Clerical errors or mistakes in public records can lead to inaccuracies in the property’s title. These errors may include misspelled names, incorrect property descriptions, or recording mistakes.

How It Affects Your Purchase: Such inaccuracies can create confusion about ownership and may require legal intervention, potentially delaying your closing date.

Solution: A title company’s due diligence includes reviewing public records for errors. Title insurance can also protect you from financial losses resulting from these mistakes.

3. Boundary Disputes

Boundary issues arise when property lines are unclear or contested. These disputes may involve neighboring properties or arise from outdated surveys.

How It Affects Your Purchase: If another party claims ownership of a portion of the property, it can complicate your plans for development or resale.

Solution: Request a current property survey during the due diligence period. If disputes arise, they must be resolved before closing.

4. Unpaid Property Taxes

Outstanding property taxes are a common title issue. Sellers may fail to disclose unpaid taxes, leaving the buyer responsible for settling the debt.

How It Affects Your Purchase: Unpaid taxes become a lien against the property and must be resolved before the title can be transferred.

Solution: A title search will reveal any unpaid taxes. The seller is typically responsible for paying these debts before closing.

5. Heir Claims and Inherited Property Issues

When a property is inherited, multiple heirs may have a legal claim. Disputes often arise when heirs disagree on the sale or are unaware of the property’s ownership status.

How It Affects Your Purchase: These disputes can stall or nullify the sale, particularly if not all heirs consent to the transaction.

Solution: Ensure the seller provides clear documentation proving sole ownership or consent from all heirs. Title insurance can offer protection if claims arise after purchase.

6. Forgery and Fraud

Fraudulent activities, such as forged signatures on deeds or falsified documents, can disrupt the title’s legitimacy.

How It Affects Your Purchase: If fraud is discovered, it can lead to lengthy legal battles and financial losses.

Solution: Title companies are skilled at detecting signs of forgery. Additionally, purchasing title insurance safeguards you from potential financial repercussions.

7. Easements and Encroachments

An easement grants someone else the right to use part of your property, such as a utility company accessing pipelines. Encroachments occur when a structure from a neighboring property crosses onto yours.

How It Affects Your Purchase: Easements and encroachments can limit your property’s use and may affect its value or future development.

Solution: Review the title report and property survey for existing easements or encroachments. Understand their implications and negotiate with the seller if necessary.

Protecting Yourself from Title Issues

While title issues can be daunting, they don’t have to derail your home purchase. Here are some additional steps to safeguard your investment:

Hire Professionals: Engage a qualified real estate attorney and a reputable title company to handle the title search and closing process.
Purchase Title Insurance: Title insurance protects you from financial losses from title defects. It’s a one-time cost that provides peace of mind.
Thorough Due Diligence: Carefully review the title report, survey, and all related documents before purchasing.
Ask Questions: Don’t hesitate to seek clarification about anything you don’t understand. Transparency is key to avoiding surprises.
Negotiate Repairs or Resolutions: If issues arise, work with the seller to resolve them before closing. This may involve covering debts, correcting documents, or renegotiating the purchase price.

Conclusion

Buying a home is a significant financial and emotional investment. By understanding the most common title issues and taking proactive measures, you can protect yourself from potential pitfalls. Partnering with experienced professionals, conducting due diligence, and investing in title insurance can ensure a smooth and successful transaction. With these safeguards, you’ll be one step closer to making your dream home a reality.

Learn more about our comprehensive title insurance services here.

Thank you for reading! If you enjoyed this article and want to explore more content on similar topics, check out our other blogs at Sonic Loans, Sonic Realty, and Sonic Title. We have a wealth of information designed to help you navigate the world of real estate and finance. Happy reading!

Provider and Settlement Service	Charge or Range of Charges
Sonic Realty LLC	1%-6% of purchase price
Sonic Title Agency, LLC	Title Insurance Policy: $950 - $1706 on a $250,000 property. (Rates vary and are dependent on the state, selling price, and loan amount on the property.) Title Search Fee: $250 - $325 (where applicable) Closing Fee: $450 - $650
Sonic Loans Inc. This company provides various real estate mortgage loan origination activities either as a third-party originator or a mortgage broker, including loan pre-qualification, competitive bid process (when providing third-party origination services), loan origination, loan pre-approval, loan structuring, processing, and closing.	Loan Origination Charge: 0-3 % of loan amount (may include 3^rd party fees) Loan Discount Fee/points: 0.5%-6% of loan amount. Application/Processing Fee: $0.00 - $875.00 Flood and tax service: $0.00 - $95.00 Underwriting Fee: $0.00 - $1295.00 Document Review Fee: $0.00 - $400.00 Appraisal Fee: $0.00 - $850.00 Credit Report Fee: $0.00 - $135.00 Actual charges may vary according to the particular lender selected, the particular services provided, and the underlying transaction, borrower selections, etc. Some or all of these fees may be charged by third parties and/or the Member Mortgage Lender/Mortgage Broker. The Member Lenders and Mortgage Brokers have agreed to pay a fee ranging from 0.5% to 2.75% of the loan amount to Sonic Loans in connection with a range of loan origination services provided by Sonic Loans to the Member Lender/Mortgage Broker. The fees are paid either directly to Sonic Loans by the Member Lender/Mortgage Broker or billed directly to you at closing.

Provider and Settlement Service	Charge or Range of Charges
Appraisal Fee	$0-$800
Credit Report Fee	$63-$125

The 7 Most Common Title Issues That Could Derail Your Home Purchase