Buyers often face title issues, which complicate property transactions. Read below for insights into how you can resolve these issues during the escrow period.
One of the homebuying complexities is encountering title issues with the property. These issues include disputes over property boundaries, unpaid taxes, or undisclosed liens. They can delay or even disrupt a real estate transaction. Hence, it is crucial to address and resolve them promptly during the escrow period.
Buyers must conduct a thorough title search and consider purchasing title insurance to protect themselves from potential financial losses. Understanding how to manage these challenges ensures a smoother path to closing.
Today, we will discuss different issues and explore practical solutions to resolve them during escrow.
Before jumping onto solutions, let's first understand common title issues you might encounter during the escrow period:
These are claims against a property by creditors to whom the property owner owes money. The claims include mortgage dues, tax liens, or mechanic's liens. These liens or encumbrances must be cleared before the property can be transferred.
These disputes occur when the exact boundaries of the property are unclear or when there is a dispute with neighboring properties. These conflicts over property boundaries or easements can lead to legal challenges if not resolved during the escrow period.
This issue concerns determining who holds a valid claim to the property. Sometimes, public records may not reflect accurate or current ownership due to clerical errors or disputes among potential heirs.
Unrecorded issues arise due to unrecorded deeds, wills, or claims from heirs. These interests include certain easements or leases and can affect the rightful ownership.
When title issues arise during the escrow period, follow these steps to address and resolve them:
The first step in addressing title issues is carefully reviewing the title report. The title company usually prepares this document, outlining the property's history, defects, disputes, and existing liens and encumbrances. Go through it thoroughly to identify any issues.
Engage with the escrow officer, real estate agent, and, if needed, a real estate attorney to understand the issue's nature and implications. These professionals are integral in navigating such issues. They can provide insights and recommend steps based on the specifics of the problems identified.
The resolution will depend on the type of issue.
If there are liens, work with the seller to clear them. The collaboration might involve paying off debts, obtaining a lien release, or negotiating settlements with lien holders.
Engage a surveyor to clarify boundaries. If easements are involved, get clarity of their impact on the property's use and, if necessary, negotiate with neighbors.
If ownership is unclear, obtain affidavits or other legal documents to resolve the ambiguity during the escrow period. Work with legal professionals to correct any inaccuracies in public records. This process could involve tracking down missing heirs or resolving disputes among owners.
Address claims by obtaining proper documentation or agreements from interested parties before proceeding.
Title insurance protects the buyer (and their lender) from future claims or legal fees to fight disputes against the property's title. If issues are resolved, ensure that title insurance is still viable and covers potential risks.
Suppose the issue requires significant effort to resolve or affects the property's value. In that case, you may need to negotiate with the seller or the other party to reach a resolution that allows the escrow to close. This coordination could involve adjusting the purchase price, extending the escrow period, or agreeing on additional terms.
Resolving title issues can take time. Be prepared for potential delays in the escrow, and keep all parties informed of the progress.
While encountering title issues during the escrow period can be stressful, understanding and proactively addressing these issues can mitigate risks and facilitate a smoother transaction. Buyers can navigate these challenges effectively by working with real estate professionals and taking the right actions.
Once the issues are resolved, confirm that the title company has cleared the property and that all parties are ready to proceed with the transaction. Ensure all relevant documents are updated, and coordinate with the escrow officer for a smooth closing.
Conducting a thorough title search and obtaining title insurance are the best strategies to prevent these issues from complicating the escrow process.
While many issues can be resolved before closing, some may require more time and negotiation, potentially leading to delays.
Usually, the seller is responsible for clearing these issues before closing. However, buyers should stay proactive and consult with their real estate agent and lawyer to ensure all issues are resolved.
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