Finding the perfect property in New York is a challenge. You probably checked out listings in multiple boroughs, searched for hours online and met with numerous agents before finding a place you want to call home. You may have scraped for a down payment, haggled with the seller and cowed to the lender. However, that may have been the easy part.
Now that the process is in motion, your job is to wait. Meanwhile, the work behind the scenes involves making sure the house you want is legally the seller's to sell. In other words, investigators are performing a search on the title of the property you want to buy.
Should I be worried?
Over one third of all real estate deals involves some glitch with the title, often referred to as clouds. This may mean that someone besides the seller has a claim on the property. In many cases, the claim may be an old one that is no longer valid, and these may be simple to clear. However, if the title is not free of such clouds, the seller cannot legally sell you the property. Clouds on a title may arise from circumstances such as the following:
- The seller inherited the property with a co-heir who cannot be located to sign off on the sale.
- The seller's divorced spouse placed a lien on the house to settle past-due alimony or child support payments.
- The house was part of a bankruptcy proceeding.
- The state or IRS placed a lien on the house for back taxes.
Liens, such as those for child support, may remain on a title even if one resolved the financial issue a long time ago. However, if the person placing the lien fails to file for a release of the lien, the cloud remains on the title, and the seller must resolve it before he or she can sell the property.
Slow but sure
A common type of lien on a title is a mechanic's lien. Contractors or subcontractors may file for a lien on the title of a house as soon as you hire them to make repairs or renovations on your house. They may do this in order to ensure payment for the work they do. However, sometimes, such a worker will forget to release the lien when they complete the work and receive their pay.
While mechanic's liens often have an expiration date, you may find that such a cloud on the property you want to purchase will delay the process considerably. In fact, any cloud on the title will slow down the progress toward settlement, but you want to make sure your title is free and clear before you sign. To ensure your protection, you may investigate the benefits of title insurance and speak with an attorney about your options.