Title issues are rarely given much consideration by home buyers and sellers. Most buyers don’t even know what title issues they should be concerned with. Sellers usually assume that there won’t be any title problems affecting their property. However, unanticipated problem title issues can arise, often with unpleasant consequences.
Recently, Oakland, Calif., homeowners were in for a big surprise. They negotiated a home sale and soon after discovered that their neighbor’s mortgages appeared on the title report on their own property. The sellers naturally assumed that the title company that produced the report had made a mistake. But, after researching the problem, the title company informed the sellers that there was a problem, and it was due to no fault of the title company.
About a year before putting their home on the market, the sellers substantially upgraded their drainage system. They approached their neighbors at that time and requested a drainage easement across the back of the neighbor’s property. The neighbors agreed. A real estate attorney handled the transaction and recorded the easement. The sellers assumed that the easement had been properly granted. Unfortunately, it had not been properly drawn or recorded.
Consequently, the title company couldn’t insure title to the property without going through a rather complicated legal procedure that was both time-consuming and expensive. Since it was impossible to correct the problem by closing, the sellers agreed to leave a substantial amount of money with the title company until the title problem was corrected.
Had the sellers checked to make sure that the easement had been properly drawn and recorded before they put their home on the market, the problems could have been corrected in time for closing. They would have walked away from the sale with all of their proceeds in their pocket.
Another home seller did check the title record to her property before putting it on the market. Her husband had died recently, and she assumed that the property was held in the name of her family trust. The title report revealed that title was still held in her and her husband’s names, not in the trust. This could have had undesirable tax consequences if it had not been discovered in time. As it was, there was time to remedy the problem before the sale closed.
HOUSE HUNTING TIP: If any changes have been made to the title record on your property, it’s wise to follow up and make sure that these changes were made correctly. In the case of the widow mentioned above, she assumed that her attorney had put the property she was selling into trust. If she had waited until she had a sale on the property to find out that a mistake had been made, there might not have been enough time to correct the problem before closing. This would have meant that she would have had to pay a substantial capital gains tax bill.
As soon as buyers receive a copy of the title report on the home they’re buying, they should make sure that the owner of record is the same as the person who has agreed to sell them the property. In probate sales, it’s not uncommon to discover that the seller doesn’t actually have the power to sell under the terms of the will. Find out who the legal owner is and who has the power to sell.
THE CLOSING: Check easements carefully. If the sewer needs to cross a neighbor’s property to hook up to the city sewer system, or if you will need to cross someone else’s property to come and go from the property you’re buying, make the necessary easements have been recorded to allow this.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
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