Whether you are investing in property for buying your own home, one of the most important documents to the transaction is the abstract. An abstract contains the chain of title for previous owners of the property and is normally provided to buyers following the closing of the sale. Following the signing of the purchase agreement, the buyer/lender will select an attorney to prepare a title opinion and the seller is responsible to transfer clean title at closing. Many title objections can be resolved relatively quickly, occasionally, these can cause delays to your closing. Here are 5 common residential title issues to watch out for.
1. Prior titleholder Liens
Occasionally, I have seen abstracts where a mortgage was not released held by a previous owner. Depending upon how old the mortgage is, who the mortgagee is the solution can be simple or take more time. Fortunately, Iowa Title Guaranty offers a “Mortgage Release Certificate” to help with some of the more sticky situations.
2. Easements
An easement is a legal right to use someone else’s property for a specific purpose. Many properties have easements, most of which are filed when creating the subdivision. For instance, your property might have an access road that can be used by other people, or a common driveway that you share with your neighbor. The abstract will show all easements recorded against a specific property. The attorney’s title opinion should mention easements affecting the use of the property and it is important for a buyer to ask questions before closing.
3. Child Support Orders
During a divorce, child support may be ordered so that the non-custodial parent can provide financial support to the other parent for the benefit of the child. In Iowa, each monthly child support payment acts as a lien against real property for 10 years from the date the payment is due. When a home is sold, we must verify that child support is current through the month of closing in the form of an affidavit signed by the parent to which child support is paid.
4. Missing Assignments and Defective Release
Lenders are required to prepare a lien release/discharge/satisfaction of Mortgage upon receiving the full payment for the mortgage. In most cases, this is done properly. As mortgages are often sold between lenders and various servicers, it is vital that the necessary assignments are shown of record and the release be signed by the bank that holds the interest in the mortgage. The individual who signs the release must have authority to sign. Authority can be as simple as
writing their title after their signature or if they are signing as attorney-in-fact for the lending institution, the power of attorney document must be recorded in the county where the property is located. This sounds like common sense, but mistakes do happen and cause headaches during closings.
5. Judgments
If a property owner has a judgment entered against them (small claims or district court), it is likely this judgment will show in the abstract and title opinion. It is then the seller’s responsibility to demonstrate that this judgment is either not a lien against the property (i.e homestead) or against an individual with a similar name only. If the judgment is against the titleholder, and is a lien against the property, it must be paid in full and released prior to the transaction closing.
The best way to protect yourself against any losses when it comes to real estate is to consult an experienced real estate attorney. If you are unsure about the property sale, attorney Jeremy Danilson is here to help. Get in touch today at 515-512-5500.
