Common Title Issues That May Arise Before a Real Estate Closing

After a real estate contract is signed, the purchaser’s attorney will usually order a title search. The purpose of the search is to confirm that the seller owns the property and can transfer clear and marketable title at closing. Even when a transaction appears straightforward, the title report may reveal issues that must be addressed before the closing can take place.

One common issue is an open mortgage or lien. A prior mortgage may have been paid in full but never formally discharged of record. The title search may also reveal judgment liens, tax liens, unpaid property taxes, or other claims against the seller or the property. These items generally must be paid, released, or otherwise resolved at or before closing.

The search may also uncover ownership or deed problems. A prior deed may contain an incorrect legal description, a misspelled name, a missing signature, or an improper acknowledgment. There may also be questions involving a deceased owner, an estate, a trust, a former spouse, or another person who may still have an ownership interest in the property.

Survey and boundary issues can also delay a closing. Improvements such as fences, sheds, driveways, garages, decks, or swimming pools may encroach onto neighboring property or violate setback requirements. A neighbor’s structure may also encroach onto the property being purchased.

Another frequent concern involves open building permits, certificates of occupancy, and municipal violations. An addition, finished basement, converted garage, deck, or other improvement may have been constructed without required permits or approvals. Depending upon the contract and the nature of the issue, the seller may be required to obtain approvals, cure violations, or provide an acceptable closing credit or escrow.

The title report may also disclose easements, restrictions, and rights of way affecting the property. Some are routine, such as utility easements, while others may limit how the property can be used or developed. Purchasers should carefully review any restrictions that could interfere with their intended use of the property.

Bankruptcy filings, pending lawsuits, unpaid homeowner association charges, and errors in public records may also create title concerns. In some cases, the issue can be resolved quickly through additional documentation. In others, the closing may need to be delayed while corrective documents, releases, court orders, or municipal approvals are obtained.

Most title issues are curable, but identifying them early is important. Prompt review of the title report allows the attorneys, title company, lender, seller, and purchaser to address potential problems before the scheduled closing date and reduce the risk of an unexpected delay.

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