Get A Clean Title at Closing

For most people, their home is the most significant investment they'll make in their lifetime. Therefore, there must be a clear title to the home they're purchasing, and that detail needs to be completed prior to closing escrow.

What is A Clean Title?

A clean title to a home means that there are no outstanding encumbrances that might jeopardize the owner's claim to the property. Encumbrances can take many forms, such as the following, which is not an all-inclusive list:

• Mechanic's liens:
This type of lien is placed by a contractor or sub-contractor who is doing work on the property, and a mechanic's lien ensures that they'll be paid for their work. It typically covers the time and materials required to complete the job. When the job has been completed, and the contractor or sub-contractor has been paid, forms are completed and recorded to release the mechanic's lien.

• Delinquent tax liens:
State, federal, or local municipalities can file a tax lien on any property whose owners fail to pay property taxes timely.

• Support liens:
Anyone who is delinquent in either child or spousal support may be subject to a property lien, and it may not be discovered for years. A title search should uncover any lien of this type.

• Bankruptcy lien:
If a property owner has filed for bankruptcy, creditor claims against the property can exist and may be challenging to clear, even after the bankruptcy was discharged.

• Fraud:
Whether the fraudulent signer was a spouse or an unknown individual, if a signature on a title has been forged, it must be cleared before another individual can take ownership of the property.

• Clerical errors:
Sometimes, simple clerical errors can prohibit a clear title for the new owner. These are generally easier to fix than other title encumbrances but must be cleared and the deed re-filed before the closing process can continue.

• Boundary issues:
Property lines must be clearly established for there to be a clear title to a piece of property. If there are no clear boundary lines, then a survey must be conducted, and clear boundaries established. Otherwise, the property line could encroach on public land or another person's property, and legal issues can ensue.

How Far Back Do Title Searches Go?

Typically, a title search will go at least 42 years in the past to determine a clear title. Sometimes searches go further back than that, depending upon the chain of ownership. Public records, judgments, and filings are examined to determine that the title to a piece of property is clear.

Why Is a Title Search Necessary and Beneficial?

If no clear title to a property is available, the sale or refinance may not be able to be completed. If the title isn't clear, it can cost the owner a substantial amount of money if it is contested. Additional legal issues can arise, including liability for damages. Those purchasing any property should hire a reputable title company to conduct a comprehensive title search before escrow concludes.