5 Title Issues Real Estate Investors Should Know
Strategies to Help Investors Deal with Them Proactively
by Radian Title Services
Build a thriving portfolio by identifying opportunities and implementing strategies to help protect your investments. Successful investors may use due diligence to their advantage, positioning them to navigate challenges and grow their real estate investments. But even the most carefully curated portfolios can face unexpected challenges. Here are five common title issues that could turn your portfolio into a financial nightmare and strategies to help you deal with them proactively:
1. Undisclosed Liens
Consider this — you closed on a seemingly ideal rental property, only to discover it carries a mechanics lien from a previous, undisclosed renovation. This situation could impact your projected returns.
Best Practice // Be proactive and insist on a comprehensive title search. Understand how the title company identifies recent liens that may not already be reflected in public records.
2. Survey Discrepancies
Inches can cost thousands in boundary disputes. You may encounter situations where, post-closing, neighboring property owners contest the boundaries of a newly acquired property. This could lead to costly legal proceedings and property line alterations.
Best Practice // Help minimize boundary-related conflicts by obtaining professional surveys, particularly for properties with complex lot configurations or newer subdivisions.
3. Unknown Heirs
Don’t let heirs sneak up on you. In probate or estate sales especially, previously unknown heirs of a prior owner may emerge with legitimate claims to the property, complicating what appeared to be a clear title.
Best Practice // Consider title insurance that affords coverage for potential heir claims. When acquiring property through probate or estate sales, it may be a good idea to conduct additional research into the deceased’s family history.
4. Document Forgery
Be aware that instances of forged documents are possible. They can lead to your ownership being questioned and legal disputes regarding your ownership rights.
Best Practice // Don’t fall victim to this issue by carefully examining the chain of title ownership. Be wary of unexplained gaps in ownership or unusual transfer patterns. If any aspects of the title history seem questionable, there may be reason to investigate.
5. Undisclosed Easements
Investing in a property with plans to expand or develop is exciting! Just make sure you aren’t surprised with any undisclosed easements; they may impact property usage and development potential.
Best Practice // Thoroughly review the property’s title commitment. Pay attention to the exceptions section, which details easements and other encumbrances that might not be covered by the title policy.
Financial Implications
Imagine watching years of hard-earned profits vanish due to an unforeseen title issue. Even seasoned investors can fall victim to these problems. Be proactive and take steps to help protect your investments. According to a study commissioned by the American Land Title Association, the most frequent types of claims can cost $26,000 on average to resolve, including $5,000 to defend. Some of the most expensive claims can exceed $143,000 — more than enough to wipe out the profits from a deal. Purchasing owner’s title insurance may help protect you from paying these costly claims out of pocket.
Help Safeguard Your Real Estate Portfolio
Pursue opportunities confidently by knowing that your investments are insured with title insurance. Comprehensive title protection can be your secret weapon for risk management and portfolio growth. Title insurance, offered by providers like Radian Title Insurance, provides protection for as long as you own the property, all for a one-time premium, making it an invaluable resource to add to your toolbox.
Prioritizing title due diligence helps avoid potential pitfalls and position real estate investors to realize the maximum potential of their investments. Successful investors don’t just identify great opportunities, they excel at protecting their investments for long-term growth. Sharp insights may drive success, but proactive planning helps ensure it lasts.
This communication is intended to convey general information only and not to provide any legal or accounting advice or opinions. An attorney or accountant should be consulted for specific information.
