Title Search Red Flags: Common Issues That Can Delay Your Closing

Real estate transactions are complex undertakings that require careful attention to detail at every step. One of the most important components of the process is the title search—a comprehensive review of public records to verify the legitimacy of property ownership. A successful title search confirms that the seller has a clear right to transfer the property, free from unresolved claims or encumbrances. However, this process sometimes reveals title defects or “red flags” that may delay or even jeopardize a closing.

1. Liens and Judgments: Unresolved Claims on Property

A lien or judgment is a legal claim against a property to secure payment of a debt. These unresolved financial claims must be settled before ownership can transfer unencumbered. Failing to address a lien is a frequent cause of delayed closings.

Types of Liens and Judgments

• Mortgage Liens: When a mortgage exists on the property, it must be paid off—or satisfied—at closing. This is typically accomplished using sale proceeds, coordinated by the settlement agent.

• Tax Liens: Unpaid property, state, or federal taxes can result in a lien. These typically take priority and must be resolved before all other claims.

• Mechanic’s Liens: Contractors or suppliers may file a lien if they have not been paid for work or materials. These often stem from renovations or repairs.

• Judgment Liens: If a seller has outstanding legal judgments, a court order may attach a lien to their real estate.

Resolution Strategies

After identifying a lien or judgment, we promptly request up-to-date payoff statements from the creditor or lienholder. All parties involved in the transaction should be made aware of these obligations. The seller is generally responsible for resolving the debt, often through the sale’s proceeds at closing. In complex scenarios, such as disputes over lien validity, legal assistance may be required.

Disclaimer: Buyers should not proceed to closing until all liens are fully satisfied and a release of lien is recorded. Proceeding without proper clearance can risk legal and financial complications post-closing.

2. Errors in Public Records and Ownership History

Accurate public records are essential for establishing a clear chain of title—the documented history of property ownership. When discrepancies, omissions, or errors occur, they may cloud the title and suspend closing.

Common Record-Related Issues

• Clerical or Filing Errors: Documentation mistakes—such as misspelled names or incorrect legal descriptions—can create confusion and obstructions during the title transfer.

• Unknown or Missing Heirs: If a previous owner’s estate was not fully settled, heirs with a potential claim may emerge and contest the property’s transfer.

• Illegal or Defective Deeds: Instances of unauthorized signatories, underage conveyance, or forged documents can compromise the title’s validity.

Remediation Steps

Our approach entails a meticulous examination of the property’s chain of title. If discrepancies exist, we pursue corrective measures such as recording amended documentation, obtaining release or consent from legitimate heirs, or, if necessary, initiating a quiet title action through the courts. These procedures are crucial to preserving a property's marketability and ensuring new ownership is not exposed to unexpected claims.

Warning: Failure to resolve gaps or errors before closing may result in future legal disputes or financial losses.

3. Boundary Disputes, Encroachments, and Easements

Physical and legal rights relating to a property’s land boundaries frequently contribute to title search red flags. These issues often come to light through surveys or the review of recorded easements.

Typical Issues

• Boundary Disputes: Neighbors may disagree on the precise location of property lines, sometimes due to historic survey inaccuracies or unclear documentation.

• Encroachments: Portions of a structure—fences, driveways, sheds—may cross onto adjacent property. The existence of unresolved encroachments can impede or prevent a successful transfer.

• Undisclosed or Unrecorded Easements: Easements grant legal rights to others for certain property uses, such as utility access. Uncovering previously unknown easements during the title search can affect property value and buyer plans.

Resolution and Mitigation

A current land survey and thorough review of documentation are essential. To resolve disputes:

• Parties may negotiate boundary line agreements or record corrective deeds.

• Encroachments might be addressed through the removal or granting of easements.

• In unresolved situations, litigation or a title insurance claim may be necessary.

Note: Title insurance can offer protection in certain scenarios, but we recommend prompt identification and resolution before closing to minimize risk for all parties.

Ensuring a Smooth Closing

A comprehensive title search is a best practice for mitigating transaction risks in real estate. While red flags—such as liens, ownership discrepancies, and boundary or easement issues—can disrupt the timeline, most are resolvable with prompt attention and professional management. Working with a knowledgeable and proactive title company substantially increases the likelihood of a secure, on-time closing.

At ClosePoint USA, LLC, our experienced team coordinates with all involved parties to identify title issues early and facilitate resolution. If you are preparing to purchase or sell property, scheduling a title search in New Jersey is an essential precaution for a successful closing process.

Frequently Asked Questions (FAQ)

How long does it take to resolve a title issue?Timeframes vary. Simple payoff issues might be addressed within days. Complex problems involving legal proceedings, such as unknown heirs or disputed boundaries, may take weeks to months.

Who is responsible for paying to clear a title issue?Sellers are generally responsible for delivering a clear and marketable title. Costs to resolve title defects usually come from their proceeds at closing. Complex matters may involve negotiations or contributions from other parties.

The ClosePoint USA Team provides professional title and settlement services across New Jersey and Pennsylvania. We leverage our expertise and technology to deliver an efficient closing process for buyers, sellers, attorneys, lenders, and our referral partners. To begin, get a free title quote from our dedicated team.