One of the tasks that needs to be completed before your real estate transaction can close is the title search. A title rep will research the property to make sure that the seller has the legal right to sell the property. If there are no problems found in the title search, the title is clear, and the deal can proceed. But if there is a problem, the title is “clouded.”
In most cases, a cloud on title can be resolved quickly and your real estate deal can close on schedule. But in some cases, a cloud on title can kill your real estate transaction.
Here’s what you need to know about clouds on title and how they affect your real estate deal.
What is a Cloud on Title?
Several different types of problems create a cloud on title. These include:
Liens. Liens are claims against the property for unpaid debts. This can be a tax lien, HOA lien, mechanic’s lien (for work performed on the property by a contractor), or judgment lien (for money owed to another party through a court order).
A deed that was signed, but never properly recorded.
Easements that have not been properly recorded.
Pending lawsuits (lis pendens) over ownership rights to the property.
Legal relationship changes where a previous owner has not been removed from the deed. This is common when spouses purchase a property together then divorce and fail to remove one party from the deed.
What Do I Do About a Cloud on Title?
If you’re the buyer, there’s very little you can do about a cloud on title. You need to wait for the seller to resolve the issue. It is technically possible to purchase a property with a cloud on title (unless you’re using a mortgage to finance the purchase since most lenders won’t loan money for a property with a clouded title). But, if you purchase a property with a clouded title, you’re assuming the legal responsibility for that claim against the property, which can be a serious risk.
If you’re the seller, you can remove the cloud by resolving whatever issue created the cloud.
For example, if there is a lien against the property for an unpaid debt, you need to pay the debt to remove the lien. If a deed or easement were not properly recorded, you need to file the appropriate paperwork to legally record the documents. Or, if the cloud is caused by an ex-spouse who was not removed from the deed, you need to have that ex legally release their claim on the property.
How We Can Help
Clouds on title are one of the many issues that can quickly complicate a real estate transaction. This is why it’s so important to have a licensed professional represent you when buying and selling property. It’s important to remember that buyers don’t typically pay any real estate agent fees (since all fees are paid by the seller), so if you’re buying, it costs you nothing to hire a real estate professional.
And if you’re selling, we understand that the real estate fees can be substantial. But it’s important to remember that homes sold by the owner sell for an average of 26% less than homes represented by real estate agents. Listing with an agent more than pays for itself. And it will save you so much time and trouble!
The experts at Sequoia Real Estate have seen it all. We know how to help you navigate complications like clouds on title. And we’re ready to serve you. Contact us today for a free consultation!