Today, it seems that there are more issues than ever that are arising that can cause a real estate transaction to melt down just before closing. For buyers, most mortgage companies have now started running the buyer's credit just prior to close to look for additional purchases and some have even performed last minute employment checks to ensure the buyer isn't laid off.
On the seller side, the title search was a mere formality usually reserved until just before the closing to ensure the party that signed the contract is actually the one that owns the home. Well, a formality no longer, a title search is a significant step in the process that needs to be completed at the beginning of the listing.
The title search reveals who the true owners of the property are and if there are any liens on the property. The most typical lien is a mortgage but others include:
- Property Tax
- Income Tax
- Unpaid HOA
- Second mortgage
When listing a home for sale as a short sale, it is imperative that the seller have a title search performed to know who has to agree to allow the sale to go forth. It is quite common on a short sale to uncover personal liens, such as unpaid personal taxes, that need to be satisfied in order for the sale to go forth.
So what happens when the home cannot close because of a title defect?
In North Carolina, a real estate commission is said to have been earned when the listing agent brings a buyer that is ready, willing, and able. That's it!
So let's say that you're a homeowner selling their home and you cannot provide the buyer with a clean title because of an unpaid child support that has attached to your home as a lien that you are refusing to pay. You might have just opened yourself up to a lawsuit where the purchaser can sue you and the agents can sue you even in the home never closes.
So take my advice as consider performing a title search at the time of listing to prevent a surprise from opening you up to a world of hurt.