When you buy real estate in Washington, a key legal step involves ensuring that you are acquiring clear title to the property. There are a number of issues that can cloud title to a piece of residential real estate. And even if you buy title insurance, resolving these issues after closing can still be a challenge. As a result, it is a good idea to try to identify these issues before you close, if possible. This is true whether you are buying a home that is 100 years old or you are buying new construction in a new development.
7 Common Issues with Residential Real Estate Titles
The following are seven examples of common residential real estate title issues. While many of these issues can be avoided with a thorough title search, some of them are simply not possible to discover prior to closing. By combining a title search with a good title insurance policy, you can feel confident that your legal rights are secure:
1. Administrative Mistakes in the County Property Records
When deeds get recorded in the county property records, it is possible for the people recording them to make mistakes. From transcription errors to filing deeds in the wrong place, various types of errors can make it difficult (if not impossible) to find prior title records during a standard search.
2. Outstanding Lien(s) on the Property
When you take out a mortgage to buy a home, your lender places a lien on the property. This lien gives your lender the right to take ownership of your home to satisfy your debt (via foreclosure) in the event that you do not make your monthly payments. While banks today typically do a very good job of recording their liens on homeowners’ properties, (i) mistakes happen, and (ii) this has not always been the case.
Various other types of liens can exist on a residential property as well. Even though it is the seller (or another prior owner) who incurred the debt, the lien can stay with the property until the debt is satisfied.
3. Transfer by Will or Trust
Wills and trusts are the primary documents used to direct the transfer ownership of real estate at the time of a person’s death. When a property is directed to be transferred by will or trust, the necessary title work must be prepared n order to have the transfer reflected on the public record. If heirs or beneficiaries who acquired the property by will or trust did not record the transfer, then the prior owner will still be reflected as the title owner.
4. Transfer in a Divorce
A divorce can potentially create two different issues regarding the title ownership of a residential property. First, under Washington’s community property law, both spouses are deemed to be equal owners of property acquired during their marriage even if only one spouse’s name is recorded on the title. Second, even if both spouses’ names are recorded on the title, if one spouse receives the home in the distribution of the spouses’ marital estate, then this can create the same type of non-title transfer issue discussed above with regard to transfers at death. While title ownership of real estate should be addressed during the divorce process, this is a step that commonly gets overlooked.
5. Conflicting Surveys and Boundary Disputes
Another common title issue involves conflicting surveys that show differing boundaries for the property. When buying a piece of residential real estate, it is important to be certain that you have an accurate survey, as boundary disputes with neighboring property owners can be both disruptive and expensive.
6. Prior Unrecorded Transfers
Even if the person selling you the property acquired it in a properly recorded transfer, it is possible that a prior owner did not. While it may be unlikely that an issue will arise during your ownership of the property if it did not arise with the previous owner, the potential for a prior unrecorded transfer is not an issue to be ignored.
7. Unenforceable Transfer
In certain circumstances, a conveyance of a piece of real estate can be deemed legally unenforceable. While this issue can potentially arise under a variety of different scenarios, in the residential real estate context, the most common issues involve the execution of a deed by a person who either (i) does not have the authority to convey the property, or (ii) lacks the mental capacity to do so. This can happen, for example, if a husband signs a deed for a property that is recorded solely in his wife’s name, or if an elderly individual signs a deed without fully understanding the implications of signing.
3 Ways to Resolve Common Residential Real Estate Title Issues
When one of these issues (or an additional issue) arises, there are a number of potential remedies available. Depending on the circumstances, these may include:
1. Quiet Title Action
A quiet title action is a lawsuit filed in court to correct the title record. If you legally acquired the property but the title record is incorrect, a suit to quiet title can confirm your ownership of the property.
2. Quitclaim Deed
If the prior owner acknowledges your ownership of the property, it may be possible to have him or her execute a quitclaim deed. This will allow you to correct the record without the need for a suit to quiet title.
3. Title Insurance Claim
If you purchased title insurance and the defect is covered under the terms of your policy, then you can file a claim with your insurer. It is important to note, however, that this may result in payment of compensation and not correction of the title record.
Speak with a Residential Real Estate Lawyer in Tacoma, WA
Our lawyers represent residential buyers and sellers in sale transactions and title-related matters. If you have questions about the title to a piece of property you are thinking about buying or selling in the Tacoma, WA area, we encourage you to call (253) 470-2356 or contact us online for a confidential initial consultation.