What is a title defect?

On Behalf of | Aug 31, 2020 | residential real estate, title insurance | 0 comments

When real estate professionals talk about a “title,” they discuss who has legal ownership of a property or the right to use a property. As with a title for a car, this is the actual document listing the owner or ownership arrangement. The conversation usually revolves around whether there is a clear title, or there is a title defect.

Buyer’s attorneys will do a title search as part of the regular due diligence. This enables the buyer to be aware of any legal issues tied to a property before moving forward.  Common examples of title defects are:

  • Ownership claims: There may be a dispute over ownership of a property in the family for generations (where several family members have valid claims). Perhaps there was no clear transfer of ownership to the seller. In the case of the latter, it could involve willful deception or ignorance.
  • Liens: These are put against property in efforts of forcing the property owner to pay a debt. This could be for back taxes, judgment liens where a creditor obtains a judgment for monetary damage, or an unreleased mortgage or deeds of trust. Just because they are still attached to the title does not mean they were not paid. The lender may have forgotten to release the lien, but determining the truth takes time and effort.
  • Missing or erroneous public records: Clerical mistakes happen, and paperwork gets lost. It could also be a matter of a forged document or willfully concealed information.

Attorneys are often necessary

Even the most skilled researcher will often have problems tracking down missing details that cause the defect. It may also be a matter of finding a long lost relative or descendent of a previous owner. Regardless of the circumstances surrounding the defect, real estate lawyers can quickly identify defects and propose solutions for resolving the matter — title insurance can protect the buyer if their are questions. Legal support can reduce the amount of stress and frustration or enable the buyer to walk away before the closing.