Home loans and title problems
Unpaid debts, divorce, property line disputes or even a typo in the property’s records can make it unclear who legally owns the home. These issues need to be resolved before a seller can transfer ownership of their home to a buyer. Here are some things to look out for, and what happens if an issue pops up.
What is a defect in the title?
Key Takeaways. A defective title is a title that is impaired with a lien, mortgage, judgment, or another claim. Defective titles are considered unmarketable, so the asset in question cannot be transferred or sold legally. Any encumbrances on a defective title must be cleared before the owner can sell the asset.
What is the most common cloud on a title?
Some common clouds on title records are as follows:
- Mechanic’s or construction liens.
- Clerical or filing errors.
- Unknown heirs.
- Fraud and forgery.
- Encroachments or easements.
- Boundary disputes.
- Improperly probated wills.
- False representation of marital status.
How do you resolve title issues?
Many title issues can be resolved by filing one of three common documents: A quit claim deed removes an heir and clears up title among co-owners or spouses. A release of lien/judgment removes a paid mortgage or spousal or child support lien. A deed of reconveyance records payment of a mortgage under a deed of trust.
What can make a title defective?
Here are some reasons why a homeowner might get stuck with a defective property title:
- Break in the chain of title. …
- Encumbrances. …
- Conditional ownership. …
- Multiple buyers. …
- Rediscovered Will. …
- False impersonation or forgery. …
- Survey disputes.
What happens if there is a cloud on the title?
A cloud on title is any encumbrance that puts a title to real property into question. Examples of encumbrances are foreclosure proceedings, liens on a property, probate, or fraudulent titles. Clouds on the title are resolved through a quitclaim deed.
Which of the following is a possible title issue with a real estate owned transaction?
Which of the following is a possible title issue with a real estate owned transaction? Internal audit delays.
How is a cloud on title removed?
Having a cloud on title makes it difficult to sell a home, because the property decreases in value and makes potential buyers skittish about liabilities. However, you can remove a cloud by repaying debts, taking legal action against the previous owner, or transferring ownership using a quitclaim deed.
What could delay closing on a house?
Pest damage, low appraisals, claims to title, and defects found during the home inspection may slow down closing. There may be cases where the buyer or seller gets cold feet or financing may fall through. Other issues that can delay closing include homes in high-risk areas or uninsurability.
What causes a title to not be clear?
There are a number reasons you may not have clear title. You may owe back taxes or have an old lien from a previous owner attached to the property. When you purchased the property, you may have signed the deed incorrectly. Sometimes lien holders fail to clear liens after you satisfy a debt.
What is a defective mortgage?
Defective Mortgage Loan is any Mortgage Loan as to which there is an unremedied Material Breach or Material Document Defect.
What types of defects could render a title unmarketable?
Unmarketable title defects can include:
- Restrictive covenants.
- Outstanding mortgages and other liens.
- Easements.
- Adverse possession claims.
- Encroachments.
- Variations in: the chain of title; and. the names of the grantors or grantees.
What does it mean to cure title?
Title curative is a set of procedures used to “cure” defects in chains of title, such as correcting instruments that are erroneous or ambiguous. The process is focused on whether the actual use and possession of the land under review is consistent with record title.
What is a defective title indemnity policy?
A defective title indemnity policy insures against potential liability arising from a specific title defect. Defective title indemnity policies are widely used in the property industry. If a title defect or breach of a restrictive covenant is identified in the due diligence process, this can affect value.
What does a title indemnity policy cover?
Legal indemnity insurance covers the buyer and the mortgage lender in the event of any loss of value on the property as a result of the defect. The indemnity policy doesn’t actually remedy the defect – it just provides financial compensation in the event of the defect causing a loss.
What does title indemnity mean?
A title indemnity policy also known as legal indemnity cover may be available in respect of a title defect to protect the owner of the property from loss which might arise from the defect, for example, reduction in value of the property or paying compensation or damages.
Are indemnity policies worth it?
Indemnity insurance is a relatively inexpensive way of protecting both the seller and buyer from liability in the future. They also reduce delays in the sale if paperwork is missing. Many mortgage lenders and solicitors insist on an indemnity insurance policy being in place before a sale goes through.
Do mortgage companies accept indemnity insurance?
Since the COVID pandemic began the processing of local searches by local authorities has slowed considerably and, in some cases, has ground to a halt. An alternative to a full local search result is the availability of indemnity insurance but most lenders will only accept indemnity insurance on re-mortgage cases.
Why would a seller take out indemnity insurance?
Often, house sellers take out an indemnity policy to cover the cost implications of the buyer making a claim against their property. The insurance requires a one-off payment and lasts forever.
Do I have to pay indemnity insurance when selling a house?
In most cases, it will be you as the seller of the property who pays the insurance premium. This is on the basis that you are selling a property that potentially has various issues. However, in some cases, the parties will split the premium between them.
Can a buyer take out indemnity insurance?
Indemnity policies are typically a one-off payment, and the cover lasts forever. Buyers can also take out indemnity insurance to protect them against future problems associated with the purchase of a property.
What is home seller protection?
What Does Home Sellers Protection Insurance Cover? The insurance covers valuable costs associated with the selling of your property in a wide range of scenarios that may cause the transaction of the property sale to fail.
Should I buy a property with limited Title Guarantee?
The benefit of buying a property that holds a limited title guarantee is that it is cheaper than properties with a full title guarantee. The Limited title guarantee lot makes the property less valuable. Despite the available security the title insurance can offer, you may still opt not to get one.
Does an attorney sell with limited Title Guarantee?
LIMITED TITLE GUARANTEE
This is used where the Seller of the property has no personal knowledge of the property. This is most often used in the case of a sale by an Attorney, the Executor of an Estate, where the property has been repossessed or by a Trustees or a Personal Representative.
Can I sell with full title guarantee?
Full Title Guarantee
Basically it assures, or promises, that the seller has the right to sell the property. In legal terms the following usually applies: The seller has the right to sell the property. The seller will do their very best, and at their own costs, to ensure that the buyer has good access to the assets.