Like much of the rest of the country, the housing market in Georgia is hot, hot, hot. Sale prices are up while inventory is down, heating up the competition for the properties that are out there.
If you come out victorious in the battle for a house, congratulations. Just know you still have a few hurdles to get over before you can call that address home. One such is the potential for defects with the real estate title.
Most title problems can be taken care of so you can still close on the house. Still, it’s good to understand the different potential issues so you know when to charge on and when to walk away.
Let’s take a look at the most common issues and how to handle them.
Understanding Title and Disclosure
No matter how much you want a house, two pieces of the buying process might raise issues that keep you from doing so. The first and easiest to deal with is disclosure, which is when the seller informs you of any potential issues with the property.
Georgia takes a buyer-beware attitude toward disclosure, so sellers don’t have to fill out a form and only have to let you know about important defects in the condition of the house. Beyond that, the seller only has to answer any questions you have honestly.
This leaves a lot of room for the later discovery of something about the property that makes you want to take a pass. Make sure you discuss disclosure with your agent to ensure you ask about anything important to you.
A title is your legal ownership of a piece of property. It can be divided into different rights like the right of possession, right of control, or right of disposition. It can also be divided up among several titleholders like two spouses or siblings who inherit together.
Unfortunately, issues crop up with some of these pieces of a title that can keep you from being the legal owner of a house even if you sign a contract and pay for it. Georgia is one of just a handful of states that require you use an attorney for the closing process for just this reason. The closing attorney oversees the transfer of the property based on the contract and confirms the title is clear for purchase.
Potential Real Estate Title Issues
After the contract is signed, the closing title lawyer conducts a title examination, which searches the records to see who besides the seller might hold an interest in the property. In Georgia, the search goes back through 50 years of records.
That interest can take different forms and results in some of the more common issues or title defects that arise, including:
- Third-party liens
- Unpaid taxes
- Boundary encroachments
- Errors in records
- Legal actions
- Illegal deeds
- Missing heirs
- Frauds and forgeries
Some of these issues involve parties such as heirs or previous owners claiming outright ownership of the property. This could involve someone mentioned in a will who couldn’t be located before or a spouse whose signature was forged on a deed but never intended to sell.
Others might involve third parties that hold a limited right like the right of way for a utility line or property access. The final type of issue the attorney checks for is any third parties that have placed liens on the property for non-payment of a contractor bill, child support, or taxes.
Problems with the deed could come up if it wasn’t properly signed and witnessed as required by law to be recorded. The deed could also list an incorrect legal description of the property or be missing altogether from the chain of title. In the latter case, it might be necessary to get a deed from past owners to bridge the gap in the chain.
The seller has to prove the title is clear of issues before the buyer can take the title on the house. It’s an important step in the due diligence period of the contract process. Once the closing is complete, the buyer loses the opportunity to ask the seller to remedy any title issues.
What to Do About a Real Estate Title Defect
Any defect is a threat to your right to claim ownership of the property, so what can you do when one comes up during the title search? A buyer generally has three choices at that point depending on what the purchase contract allows. These include:
- Request that the seller resolve the issue before closing
- Request that the seller compensates the buyer for their costs to fix the issue
- Walk away from the purchase
Fixing the defects or curing the title clears the liens or other encumbrances. The process can take time and push back the closing date. It can also be expensive work, but necessary to ensure you have a clear title.
Even if you clear known defects, the title search process isn’t fool-proof, and there’s always the chance something was missed because it wasn’t recorded. This is where title insurance comes in as part of your closing package. It covers you in case a defect arises later, and lenders often require it before issuing a mortgage.
If a defect does come up later, you will need title litigation services to defend your rights and title. Your title insurance pays for these as long as the specific defect is covered by your policy. Always ensure your policy covers the most common defects and that you have an owner’s title policy and not just one that covers the lender.
Getting Ready to Buy a Home in Georgia?
Buying a house can be an exhilarating experience but also an occasionally risky business. Real estate title problems are common, and the defects can be easily rectified in most cases. Having an attorney on your side through the closing process can ensure you walk out with a home you legally own.
Do you have questions about the common title problems discussed here? Contact us to learn how we can assist you with clearing your title when buying real estate in Georgia.
Cook & Tolley, LLP
304 E Washington St
Athens, GA 30601