Since the housing crash of 2008, the mortgage market has made a slow but
steady rebound. With the bombardment of new regulations, a myriad of rules
and document changes, and aggressive competition, worrying about title
issues seems to fit at the bottom of the totem pole. However, title problems
can and do arise, and when they happen, the delay can slow your funding
or even kill your deal.
Serious title issues can result from typical “clouds” on a
title such as old service liens, encumbrances, easements, or missing conveyances
that grind your file to a halt. These potential problems should be identified
early by the title agent or by your escrow officer, but it is good policy
to familiarize yourself with the issues that can affect your closing.
Some items can get missed in the hustle and bustle of juggling multiple
During the peak of the foreclosure crisis, homeowners were scrambling to
save houses in default by any means possible. Some of the techniques employed
included filing UCC liens, deeding over the property to a relative or
third party, or filing bankruptcy against the property. While the techniques
may or may not have helped, some of those title clouds still exist in
the marketplace and must be dealt with before the title insurance policy
can be issued.
Other issues may be more innocuous but can be just as disruptive to the
process. Missing signatures on previous title transfers, deceased title
holders, mechanic’s liens, HOA dues, tax liens, or judgments all
can be resolved but must be identified early and worked through before
the file gets too far along in the process.
Many title problems will be caught and resolved by the title agent, but
some will require the originator to work with the seller or borrower to
fix them before they cause a delay. If there are problems that could slow
funding, bringing them out into the open with the client will allow you
to quickly resolve them and ensure they do not get blindsided with an
unexpected delay. If there are more serious issues that cannot be solved
by the title company, then the owner may require legal help to ensure
the title coverage is intact and complete. Certain liens or encumbrances
may expose the owner to future litigation, and an owner should consult
a competent real estate attorney to help resolve those issues immediately.
Clearing title is a process that is sometimes taken for granted, but there
may be instances when an owner will be unable to obtain title insurance
based on a title cloud. When that situation arises, a quiet title action
may need to be initiated so a court can clear up the title issue. A quiet
title allows an owner to submit a disputed title claim to the court, present
evidence, and allow the court to clear any encumbrances or blots on a
title. The action can be costly and time-consuming, but an owner should
be aware that until serious title issues are corrected, they will not
be able to close a sale or refinance the property.