Top 6 Title Issues Real Estate Investors Encounter

When you purchase an investment property, it is extremely important to perform a title search, or a thorough examination of public records to determine and confirm a property’s legal ownership.  Typically, title searches are performed in preparation for closing. However, we recommend consulting a title company or attorney early on in the buying process to find out as much information about a potential property as you can.  We have closed over 5,000 loans for real estate investors, and have seen our fair share of title problems derailing loans late in the process. Here are the six most common title issues we have seen:

1. Errors in public records.

   Sometimes, clerical errors made on prior deeds can cause delays.

2. Errors in documenting satisfied liens.

   A lien is a right to keep possession of a property belonging to another person until a debt owed by that person is discharged. Even if a lien has been satisfied or released, it might not be properly documented or recorded.

3. Probate issues.

    Probate is the legal process in which a court determines who is entitled to a person’s assets after they have died. Problems occur when a will is not probated, and the legal ownership has not been properly transferred. It is challenging to purchase a property when the legal owner is deceased.

4. Broken chain of title.

   This occurs when there is a gap in the ownership record during the span of the search. Broken chains of title are most common in properties that have been in families for a long time.

5. Foreclosure issues.

   While a foreclosed property is often a great deal, the foreclosure process is a lengthy one with copious amounts of paperwork that often aren’t properly documented, among other issues that can occur.

6. Incorrect legal descriptions.

   If there is any error in a legal description attached to a deed, the deed is considered defective and therefore impacts the chain of title.

Clearly, title can be extremely complex, which is why we always recommend working with professionals who can guide you along the process. To learn more about title, see our Title Resource Page.

Related: 5 Ways to Hold Title as a Real Estate Investor, 3 Common Contingencies in an Offer Contract