Monday, February 7, 2011
Common title issues that delay settlement
As we all know, settlements do not always happen on time. The delay can be for a variety of reasons and with varying degrees of severity. In this post, we'll explore common title issues that may delay settlement - matters that are revealed by a title search or survey that must be addressed before title insurance can be issued. In no particular order:
Unreleased liens: Whether against the prior or current owner, it's not uncommon for the record to reveal a deed of trust which was actually paid off but show as unreleased at the courthouse. Before we can settle, we need to know that all liens we're not paying off are released of record.
Lack of clarity of ownership: Here is a simple formula: [Sellers on Contract = Record Owners = Grantor on new deed]. This means we can't have individuals signing the contract when the property is in a trust. Nor can only one spouse sign a deed when both are currently in title.
Improper legal description: Some deeds have wrong lot or unit descriptions, or just do not reflect the property being conveyed. Sellers can only convey what they have and what the contract states will convey.
Missing heirs / estate issues: Every state's probate laws are a little different, but generally speaking upon death a person's property passes to her heirs per a duly executed will, or in the absence of one through operation of law (intestacy). If an heir cannot be found or does not consent to the sale, there can be problems.
Unrecorded documents: Put plainly, there may be documents missing of record which complete a chain of title (such as a deed) which can delay settlement.
Survey issues: As we discussed here, there are different types of surveys performed in conjunction with many resale transactions. Sometimes, the survey reveals issues, the most common of which are buildings which sit outside of boundary lines or setbacks.
Easements: Typical utility easements are often acceptable for a new buyer and her lender, but sometimes an easement can interfere with the use of a property (think of a powerline easement crossing where the buyers want to add a garage).
Improper execution of documents: Documents need to be property signed, dated and acknowledged before recording. Sometimes they're not. If a title search reveals these errors, we need to address them before settling.
These things happen. How can you mitigate the risk of this affecting your settlement date? Make sure your title company is ordering the title search as soon as you give them the contract!
Photo by Ambro