“Clear title” refers to legal ownership and the right to use a piece of property. When entering into a transfer of possession, a title company will research the history, in the form of a title abstract, to determine if a cloud, or exception, is in the title.
Clouds can appear in any number of circumstances and must be addressed before the property can change hands. A real estate transaction is only valid if the selling party possesses clear title. Under normal circumstances, the homeowner pays off the mortgage, and the lender releases the title.
Unfortunately, there are instances where an exchange of money occurs without an uninterrupted chain of ownership. When this happens, a person can end up with their name on the tax bill recorded in the county’s records, and the property wasn’t transferred correctly from the seller to their buyer. It is critical to pay the actual property owner to receive the deed.
Examples Of Clouded Title
A frequent contingency is a lien against the estate. Unpaid contractors like roofers or painters can file a lien against the property for work they performed but did not receive payment. The lien remains on the title until the contractor receives payment and records the appropriate paperwork.
Title research may also unearth a notice of pending litigation over the title. Unpaid taxes– the IRS can attach a lien to your real estate if you do not pay your taxes– delinquent property taxes, bills from homeowners’ associations, unpaid child support or other unpaid creditors can go to court and receive a judgment against the estate.
When dealing with a sale of land that has been in the family for generations; the original owner could be missing from the records. There are other times that someone took the land through adverse possession, and there never was a clear land grant at the beginning of the occupation. Along with this scenario are covenants of record: These are promises that the original land owner made to someone else.
During the height of the recession, we in the real estate industry saw the uptick of foreclosures. Title searches reveal if the property is subject to foreclosure proceedings, judicial or non-judicial, which can complicate a sale. Often, we would see multiple liens on a home going into foreclosure.
Parties with potential claims on the property are allowed only a certain amount of time to dispute the sale of the building. In California, parties have one year to challenge the deal
As part of the title review process, researchers attempt to match judgments listed in county records with the names of the seller. If you share a prevalent name with people in your area, you may have judgments appearing on your files that may belong to a different person
How To Ensure Clear Title
Purchasing title insurance will mitigate the risk of legal consequences if there is a dispute after the transaction.
Ensuring clear title is one reason why you should work with an experienced real estate broker. Please reach out to me with any questions.