Luke Babich outlines ways to develop and maintain a strong title company relationship to prevent any snags in your next real estate transaction
Your client has found the home of their dreams, or the property you’ve listed for a seller is finally getting an offer. Now that the goal is in sight, don’t let title issues derail the sale.
5 main types of title issues that can bring a sale to a screeching halt
Errors in the public record
A deed without specific property details or that is missing information about a property can quickly halt a sale. Missing or incorrect information needs to be supplied or fixed, so the property can be re-deeded before the sale can occur.
Ill-defined property lines
Property that is not surveyed correctly is subject to a challenge from neighbors or other people who claim the rights to a portion of the real estate in question. A title issue can also arise if part of the property is adjacent to public land or contains significant easements.
Liens on the property
Liens on the property can be anything from a homeowners’ association trying to collect past due fees to unpaid taxes or utility bills. They can even be placed in error in rare cases, making due diligence all the more important.
Potential heirs
When someone dies without a will or other clear designation of property ownership, a title can be held in probate until missing heirs are located.
Fraud (including illegal deeds and forgery)
Real estate fraud takes many forms, including a minor claiming ownership of a property or a spouse with a forged title attempting to sell the property. Scams in real estate are on the rise, including scammers claiming to own a property and selling it to an unsuspecting buyer.
While some of these title issues are more common than others, any one of them has the potential to derail a sale, or at least hold it up long enough to make buyers back out.
What to do before listing a property
Due diligence begins before you even list a property. A Clever Offers survey found that 67 percent of buyers believe that using a real estate agent is the best way to sell a house, and helping to understand the intricacies of titles is one of the reasons why. Before you list a property, here are the steps to take:
Search the title before listing
Suggest that both buyers and sellers order a preliminary title report. This can help spot liens, judgments or any ownership disputes (past or present).
Confirm all owners are ready to sell
Contact everyone listed on the title to ensure they are aware of the sale and agree to it. This includes ex-spouses, heirs or business partners. Everyone on the title must agree to the sale to avoid significant complications.
Check for outstanding liens and debts
Ask the seller about unpaid property taxes, contractor liens, HOA fees or special assessments.
Confirm the accuracy of the property’s legal description
Compare tax records and the deed to ensure the property boundaries and parcel numbers match.
Check in with the estate or trust
When dealing with a property for sale through an estate or trust, confirm the identity of the trustee or executor to ensure that they have both the authority and the documentation to list the property.
What to do while a property is in escrow
When property is in escrow, now’s the time to double down on your title investigations, working with title professionals to make sure everything is in order. Here are five actions to take on the way to closing.
Go over the title commitment
The title commitment lays out specific conditions under which a title company will issue a title insurance policy. Review it with the buyer or seller and the title officer to identify any unusual issues.
Stay on top of payoff statements
Payoff statements for mortgages, liens or judgments may take a while to issue. Request these early so closing isn’t delayed.
Don’t forget about the HOA
A very common lien that many homeowners forget about is unpaid homeowners’ association dues. Contact the homeowners’ association and ask for a resale package with rules, fees and the seller’s account status. If there are any delinquencies, ensure they are cleared during escrow.
Confirm lien releases
Sometimes a property has prior liens that have been released but were never recorded. Work with the title company to get lien releases properly recorded and filed.
Coordinate timing
Sellers who require court approval, including those involved in probate, divorce or bankruptcy, need additional time to settle everything properly. Buyers, lenders and other real estate professionals need to communicate to coordinate the timing of closing.
What to do at the closing table
You’ve worked hard for your client throughout the offer and escrow stages. Don’t let the sale fall apart just as you’re about to reach the finish line. Here are four ways to keep everything on track.
Triple-check all names and signatures
Your work remediating improperly recorded deeds was likely challenging, so don’t skip this step. Triple-check all names and signatures, ensuring the deed matches the exact legal names from the title report. This is especially crucial if someone has changed their name.
Confirm wire instructions
Fraud can occur at this stage and completely torpedo the sale. Prevent this by confirming wire instructions directly with the title company before sending any money.
Create a backup plan for missing documents
Although it is essential to take care when assembling all closing documentation, sometimes a document goes missing or is incorrectly signed. Identify mobile notaries or activate electronic signing before closing to keep the sale moving forward.
Follow up
Your job isn’t done after the last signature. Make sure the deed and release of liens are recorded and that the buyer receives their final title policy.
Relationships are everything in real estate, and nowhere is this more apparent than when it comes to titles. Develop and maintain a strong title company relationship to prevent any snags in the sale. When combined with due diligence and careful attention to detail and documentation, this relationship will keep your sales on track.
