Imagine that you have found your dream vacation home. It’s small and relatively inexpensive, so you make a cash offer because it allows you to close on the house quicker, making the seller happy. After you purchase the home, you discover that the seller was in the middle of a divorce, and the seller’s spouse claims they own the home.
Although the example mentioned above is somewhat extreme, that doesn’t mean it is impossible or hasn’t happened to someone. They would have avoided this scenario if the buyers had ensured a clear title and subsequently purchased title insurance.
Deeds & Titles
Before we explain how you can verify that you are receiving a clear title, it is essential to establish the difference between deeds and titles. Deeds are legal documents used to transfer ownership from one party to another. A title is a legal document that states you can sell the property (or another asset) because you own it. If you don’t have the title, you can’t sell it.
There are several reasons why a title wouldn’t be clear. When the owner has unpaid creditors, the creditors may attempt to put a lien on the property. In other words, the creditor wants to be paid from the proceeds of the house. If the buyer purchases title insurance, which is very inexpensive, the company will do a title search to verify that there are no such liens on the home.
Their job is to ensure that there are no liens or judgments against the property. They will even check to see if there are no discrepancies with the title. For instance, if the owner’s name does not match the name on the title (even if it is misspelled), the title is defective. Here are some other issues they will look for:
- Unpaid property taxes
- Unpaid mortgage debt
- Ownership disputes
Title Insurance
When you purchase a home through a lender, they are likely going to require you to have a Loan Policy of Title Insurance. This is to protect the money they have loaned up. Although Texas does not require title insurance, you can purchase an owner’s policy. The title insurance will not only verify that there is a clear title, but they will issue you an insurance policy as well.
Your insurance policy gives you the peace of mind in knowing that the title insurance will pay the associated costs of defending you if another party makes a claim on the property after you have purchased it.
Fraser, Wilson, & Byran
At Fraser, Wilson, & Bryan, we tell our clients that they should not purchase real estate without title insurance. The risk is simply too significant. We are accustomed to working alongside title companies, and we will always review the title commitment to ensure your interests are protected. Contact us to schedule a free consultation to speak with one of our attorneys about buying or selling real estate.
