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Title Matters: Estates, Foreclosure, Divorce and Bankruptcy

As title agents we are constantly reviewing a seller’s chain of title to determine what matters will affect the new buyer. Have you ever wondered if you really need title insurance? Your home may be new to you, but every property has a history behind it. When we search the title documents for our buyers, we uncover defects linked to that property. Title insurance protects the buyer against those defects and makes sure they are satisfied or as we call it “cleared’’ before the new owner gets to closing.

Every single transaction starts at with a title search and ends at the closing table, but what happens in the middle can be drastically different. We have the same goal to get every file to the table on time, but the route we take to get there is never the same as the last. There are many title issues that may come up when doing a search and I will name four of the most common things that affect title and settlement:

1. Estates

When a person dies, the ownership of that person’s home will pass on to their heirs or next of kin. It is vitally important to have a will in place is because having this will name who the executor of the estate should be so that they have the authority to handle those estate matters. An estate can trigger many questions when it is being sold, for example: Was the person married? Did they have a will? Was the Estate probated properly? Was an executor appointed? The answers to these questions will determine the next course of action for the title agent to take in clearing the file for closing.

2. Foreclosure

Anytime that a property is foreclosed on, the title company must examine the foreclosure proceedings. We are mainly checking the bank’s foreclosure process by pulling the legal documents from the state. With this we can be sure that the parties were served properly and that any open liens and judgments have been satisfied. Although most foreclosures are straightforward, the due diligence of examining each one is crucial to determining closing status for a buyer.

3. Divorce

Title matters come in all shapes and sizes - divorce is one item that can never be ignored. If sellers have divorced, there is usually a household property that was handled at the time. Perhaps one spouse stayed in the house and the other moved out. We often see a refinance transaction with divorce as a way to settle between spouses if one needs to buy out the other. We will look to examine the property settlement agreement and ensure the appropriate party is authorized to finance or sell the home.

4. Bankruptcy

COVID-19 has distressed many homeowners around the world. In uncertain economic times, bankruptcy filings often rise amongst property owners. Some turn to bankruptcy as an outlet to save their homes from foreclosure, vehicles from repossession or keep paychecks from being garnished. As for title matters, we always check if a seller is in active bankruptcy because this filing would place an automatic stay on the property. Simply by filing, the property now cannot be sold, transferred, refinanced, etc. without approvals from their trustee. This can completely disrupt the sale of a home if open bankruptcies exist.

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