Union County Real Estate Talk

How a Good Title Search Saved a Real Estate Closing

“I’m not the sole owner of the property I purchased two years ago?”

Two weeks before closing and this was the bad news delivered to Judy, my seller client. The closing attorney had completed the title search and found a mistake in the previous closing attorney’s work.

Judy had purchased her home from a couple who were separated and divorcing. Her closing attorney mistakenly recorded a deed to Judy with the wife’s signature only. Judy had no idea that she wasn’t the only person with title to the property she was selling.

Suddenly, the value of a good title search became very clear. Title searching is the part of the closing process where the closing attorney or title company completes a thorough search through the public records to determine that the chain of title is clear and that the seller has the right to sell the property. In Judy’s case, she only owned a portion of the property because one of the previous owners hadn’t signed the deed that transferred ownership to Judy.

The obvious solution to Judy’s problem was to find the ex-husband/previous owner and get him to sign a correction deed.

Could it be done?

The closing attorney called the real estate agent in the earlier transaction who gave him the ex-wife’s contact information. Through the ex-wife, he found the ex-husband. The ex-husband still lived in the city and was remarried. That meant that both the ex-husband and his new wife were part owners of Judy’s property.

Would they sign the deed?

Fortunately, the ex-husband and his wife were very cooperative. They signed and notarized a correction deed directly to the new buyers of Judy’s property. The closing went off without a problem and on-time.

But the situation could have gone so wrong. The ex-husband could have disappeared and not been found. He could have refused to cooperate. His new wife could have refused to cooperate. They could have demanded money in exchange for the signatures.

What would have happened to Judy’s closing if the correction deed had been impossible to obtain? It wouldn’t have happened because Judy couldn’t sell the property without all the owners’ signatures on the deed. Judy’s only recourse at the point would have been to make a claim on her title insurance policy.

Title insurance is the one-time fee that every buyer pays at closing. Mortgage companies require a title policy to cover the loan amount. For a small extra fee, home buyers purchase an owners policy to cover the entire purchase price. The purpose of title insurance is to insure the home buyer and the lender against mistakes like Judy’s that render the property unsellable.

Ask Judy about the value of a good title search and title insurance. She’ll tell you that it’s the best money spent in a real estate transaction.

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Copyright 2011. Carol Fox. Allen Tate Realtors. *How a Good Title Search Saved a Real Estate Closing*