Title insurance is designed to protect homebuyers and mortgage lenders from losses related to title issues that may arise before or after the closing of a real estate transaction. Some common title insurance issues that may arise prior to closing include:
- Liens and encumbrances — This includes any outstanding mortgages, unpaid taxes, judgments, or other claims against the property that could affect ownership rights. Though fairly common, it’s important that the seller acknowledge that all liens and encumbrances will be cleared using the gross amount received or paid in full prior to closing.
- Incorrect or missing information on the title — This can include mistakes in the legal description of the property or errors in the chain of ownership. This hurdle is revealed early in the examination process. An experienced title agency will be able to clear these title clouds by working closely with the county. It’s rare that this title cloud dramatically delays a closing.
- Boundary disputes — If there is a dispute over the location of property lines, it can affect ownership rights and create title issues. Less common but can generally be resolved with a proper survey of the property. Though there are occasions where negotiations and mediation may be necessary to resolve the dispute.
- Forged or fraudulent documents — This can include forged deeds, releases, or other legal documents that affect ownership.
- Unrecorded easements or rights-of-way — These are rights granted to someone to use a portion of the property for a specific purpose, such as a utility company or neighbor having a right-of-way across the property. So long as the seller has been transparent and the buyer agrees, this title cloud is documented and cleared.
These are all important and relatively common title issues/clouds. The title agent will address and clear these prior to closing to ensure a smooth and successful real estate transaction. A thorough title search and examination by a qualified title company can help identify any potential issues before they become a problem.