As a real estate agent, you know that ensuring a clear title is essential for a smooth transaction. However, clouds on title can complicate the process and require the expertise of a title company to resolve. Here are some of the most common clouds on title that you might encounter and how to address them with the support of your title company. 

1. Mechanic or Construction Liens 

Mechanic or construction liens are filed by contractors, subcontractors, or suppliers who haven’t been paid for their work or materials. These liens can appear unexpectedly, even after the work is completed. To resolve these, work closely with your title company to verify that all payments have been made and ensure any outstanding liens are removed before closing. 

2. Clerical or Filing Errors 

Errors in public records, such as incorrect property descriptions or misspelled names, can create significant issues. These clerical mistakes can complicate ownership transfers and require legal action to correct. Your title company can help identify and rectify these errors, ensuring the records are accurate and up-to-date. 

3. Unknown Heirs 

When a property owner dies without a valid will, unknown heirs may emerge to claim their inheritance, leading to disputes over ownership. Title searches aim to identify all potential heirs, but unknown heirs may still be missed. Collaborate with your title company to conduct thorough searches and address any claims from unknown heirs.

4. Fraud and Forgery 

Fraudulent activities, such as forged signatures on deeds or fraudulent property transfers, can create serious clouds on title. These issues often require extensive legal proceedings to resolve. 

5. Unpaid Taxes 

Unpaid property taxes result in liens that take typically priority over other liens. These must be settled before the property can be sold or transferred. Ensure all taxes are paid up to date by working with your title company to verify the property’s tax status and address any outstanding debts that may attach to the property.

6. Easements and Encroachments 

Easements grant others the right to use part of the property, while encroachments occur when a structure improperly extends onto another’s property. Both can affect property value and usage. Your title company can help identify these issues and work with you to resolve them, ensuring clear property boundaries and usage rights.

7. Divorce and Probate Issues 

Divorce settlements and probate proceedings can complicate property ownership. Disputes over property division or unclear inheritance can lead to claims against the title. Collaborate with your title company to ensure all legal proceedings are resolved and the title is clear before proceeding with the sale. 

8. Unreleased Mortgages 

Sometimes, previous mortgages are paid off, but the release is not properly recorded, creating a cloud on title and appearing as an outstanding debt that attaches to the property. Your title company can help verify that all past mortgages are properly released and ensure the title is clear of any satisfied liens.

Clearing clouds on title is crucial for a successful property transaction. By working closely with your title company, you can identify and resolve these common issues before they become major obstacles. Understanding these clouds on title and leveraging the expertise of your title company will help you navigate the complexities of property ownership with confidence and ensure a smooth transaction for your clients. 

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This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice.