One of the most important things that needs to happen when someone purchases a new home or property is a title search. A title search helps ensure that a property title is clear and that the seller of the property is the legal owner of the property being sold. A property title that has an issue might be referred to as having a “title defect” or a “cloud on the title.” Any title with a cloud on it will hold up the closing process until the title can be cleared.

Believe it or not, many title companies state that more than a third of all real estate transactions involve titles that need extensive research before they can be cleared. A title company examines public records dating back decades in search of issues such as deeds, wills, undiscovered trusts, divorce decrees, bankruptcy filings, court judgments, outstand tax debts, unknown liens, etc. In many cases, there are issues with the title that the seller may or may not have been aware of, and when these issues are discovered, they must be cleared or the sale of a property can’t happen. Clearing issues on a title can be easy, extremely difficult, or anywhere in between. Here are five common title problems that can affect the sale of a property and the legal right to transfer title ownership:

1. Divorce Decrees – This is one that comes up often. The seller has lost part, or even all, of a property in a divorce. This means the ex-spouse owns all or part of the property. The seller may not have rights to sell the property or will need to include the ex-spouse in the sale of the property.
   
   
2. Mechanic’s Liens – These liens are very common problems that can occur with a title. They are liens placed against a property by a contractor or anyone who provides services to a property. The lien is placed on the property before any work begins. This is how a contractor can be sure they get paid. Mechanic’s liens are typically removed when the work is finished and paid for. Unfortunately, a contractor might forget to file that the work has been paid for, thereby leaving the lien in place. In some instances, there is an oversight and the lien doesn’t get lifted. A seller may not be aware of the lien and the oversight is accidental. Sometimes a seller might intentionally neglect to mention it, hoping it won’t affect the sale of the property. In most cases, a thorough title search will turn up a mechanic’s lien. The lien will need to be removed before the sale of the property can be sold, whether that is through paying off a contractor for work completed or getting the lien removed if the bill was already paid.
   
   
3. Property/Boundary Disputes – Disputes over the boundaries or the property itself can hold up the sale of a property. You can look at property surveys before you buy a property that shows the property boundaries. The problem is, there may be different surveys that show different property lines, meaning a neighbor or another party might be able to claim ownership to a piece of the property you’re purchasing. This has to be cleared before you purchase in order to avoid claims against your property after purchase.
   
   
4. Easements – It’s possible that a portion of the property you are buying has an easement attached to it, perhaps by a government agency or another entity. While this may not affect the sale of the property, it can affect your rights to use a portion of the property the way you want to. Discovering an easement before you purchase the property gives you the opportunity to at least understand your limitations before you buy property.
   
   
5. Bankruptcy – Bankruptcies can present title issues. For instance, if the owner, or even one owner in the case of multiple owners, has filed for bankruptcy, it will be necessary to ensure the bankruptcy case has been discharged. The party filing for bankruptcy must sign off on the property. In cases of bankruptcy, it is necessary to petition the court to release the property from the bankruptcy process before a sale can proceed.

The above are common problems with property titles. There are numerous uncommon issues that can arise during (or after) the purchase of a home or property that can hold up the transfer of the title or potentially prevent the sale of the property in question. Missing heirs, undiscovered liens, or undiscovered errors in a title that may have occurred decades earlier can all affect your ownership even years after purchase. For these reasons, using a professional title agency is a good idea. A title search is an extensive process that needs to be thorough to avoid issues that could hold up the transfer of a title or even affect the sale years down the road.

Unfortunately, title searches don’t always uncover defects with a title, which is why there is a potential for problems to arise in the future, long after you’ve purchased your home. The title search is the first defense against such problems, but as a further measure of safety, you can purchase title insurance to protect yourself against financial loss should a title defect arise in the future. Title insurance may not prevent you from losing your property if a court rules against you in a court case, but it does at least cover the money you’ve put into the property up to the point a claim has been made. You can purchase title insurance from a title company to help protect you should a title defect arise.