When you purchase real property, part of your due diligence is to review the property title report to make sure there is clear title and to check for errors. Common errors that occur are spelling errors in the parties’ names and mistakes in the legal description.
The title report will reveal if there are any liens, judgments, deed restrictions regarding the use of the property, other encumbrances, or building encroachments. Liens arising from mortgages, tax liens, mechanic liens, and judgments must be paid and released prior to closing or title cannot be transferred. Boundary items are another common problem that can arise when you are purchasing property. You should always obtain a survey to make sure that there are no problems with improvements or encroachments so you know where your property boundary starts and ends. This will help to avoid problems with neighbors later on over building structures, building additions, fences and trees.
If you discover a defect in the title or an encroachment prior to purchasing the property, ask the current owner to correct it. If a problem such as an encroachment cannot be corrected and you still want to purchase the property, then at least you will be aware of potential issues that could result later. An owner’s title insurance policy is recommended when you purchase or transfer property. It protects the homeowner and their lender’s interest in case future property title problems arise in connection with the following:
Title insurance compensates the new owner from loss from these property title problems. Homeowners should consider purchasing extended coverage if it is available because it further protects against building encroachments, subdivision violations, tax liens, if your builder goes bankrupt and much more. There is an additional cost of approximately 30% to 50% more over a standard policy for this type of insurance.
You must notify your title insurer immediately in writing upon discovering any title problems. It is also recommended that you contact a real estate attorney who specializes in property title matters to help you resolve any issues that may arise.
A real estate attorney can assist you with property title issues by reviewing the title documents, the title policy, preparing real estate documents, and negotiating a resolution for you. Real estate attorneys are knowledgeable about real estate and property laws and can advise you of your legal remedies. Property title issues are complex, and you should not try and solve them on your own.