Among the top reasons to buy title insurance is the peace of mind it provides when it comes to clearing title defects, but what are title defects and what are some of the most common ones? Let’s find out:
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First, what exactly is a title defect? These refer to any potential threat to a current owner’s full right or claim to sell a property. The property has a publicly-recorded issue, like a lien, mortgage or judgment that gives another party a claim to the property. If you think of the title as a bundle of sticks, with each stick representing a type of right, these can be divided, tied up, and given away at various times and to different parties. Such rights can include the right of possession, the right of control, the right of exclusion, and the right of enjoyment.
Titles can be divided into four rights; right of possession, the right of control, the right of exclusion, and the right of enjoyment.
With that definition in mind, here are some of the most common title defects:
1. Public Records Errors
Mistakes happen, but when errors affect your rights as a homeowner, they can be devastating. Clerical or filing errors could affect the deed or survey of your property and cause undue financial strain in order to resolve them.
2. Unknown Liens
Prior owners of the property may not have been detailed bookkeepers or bill-payers. Even though the former debt is not yours, banks or other financing companies can place liens on the property for unpaid debts even if you have closed on the sale. This can especially be a problem with distressed properties.
3. Illegal Deeds
While the chain of title on your property may appear sound, it is possible that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or one who is reported to be single but is actually married. Such instances may affect the enforceability of prior deeds, affecting prior (and potentially present) owners.
4. Missing Heirs
When a person dies, the ownership of the home may fall to an heir or those named in the will. However, those heirs may be missing or unknown at the time of the owner’s passing. Other times, family members may contest the will for their own property rights. In such scenarios, which can happen long after you have purchased the property, could affect your rights to the property.
5. Undiscovered Will
That is the case of a contested will, but what if the will isn’t discovered until later? When the owner dies and there is no apparent will or heir, the state may sell the property. When you purchase the home, you assume the rights of ownership, however, even years later, the deceased owner’s will may be discovered, which may affect your rights to own the property.
6. False Impersonation of Previous Owner
Common and similar names can make it possible to falsely “impersonate” a property owner. If you purchase a home that was once sold by a false owner, this, too, can risk your legal claim to the property.
Forged document filed in the public record giving property rights to a dishonest party could put your rights as owner at risk.
8. Superior Claims
One final title defect we want to warn you of is that of a creditor, which is someone to whom an owner owes a money judgement, may have a superior claim to someone seeking to purchase a piece of property. A creditor protects their interest in the property by filing a lien in the county land recording office. A would-be seller of the property must pay off, or satisfy, this lien before the buyer can purchase the property.