Exploring Common Title Problems
by Radian Title Services
Thriving investment portfolios can be developed through strategic acquisitions and proactive protection measures. But even the most carefully curated portfolios can harbor unforeseen complications. Conducting thorough due diligence while identifying opportunities can help real estate investors safeguard their portfolio growth against future challenges. Here are four title issues that could compromise the stability of your real estate portfolio and some practical steps on how to help minimize them:
Seller Impersonation
Confirming Legitimacy
Seller impersonation fraud is a growing concern for real estate transactions. These schemes may include fraudsters posing as legitimate property owners to orchestrate fraudulent sales. These deceptive practices can lead to costly legal battles and significant financial losses for buyers and rightful owners alike. When purchasing property, it may be a good idea to verify that documents and signatures match the public record as well as the seller’s details.
Unknown Encroachments
Determine and Identify Accurate Property Boundaries
Encroachments, even if only by a few inches, can cause confusion about a property’s true boundary lines and may escalate into lengthy and costly legal disputes with neighbors. Be aware of any potential boundary issues and, if possible, look to resolve them prior to closing. To help identify these issues, consider obtaining a professional survey, which may be especially helpful when the property is a part of a new subdivision or contains newly constructed improvements.
Prior Legal Proceedings
Navigating Complex Circumstances
Bankruptcy, foreclosure, and other legal proceedings involving prior owners in the chain of title may require scrutiny during the title review process. Adverse judgments and noncompliance with legal requirements in such cases can impact the property’s title and have the potential to delay or prevent the sale from closing. Conducting thorough due diligence and comprehensive title searches early in the transaction process can help identify these complications before they affect the closing.
Easements and Right of Way Issues
Determining Rightful Usage
Easements and other restrictions regarding a property’s usage and development can create difficult and potentially costly conflicts down the line. They can inhibit development, usage, and even future construction and landscaping plans of a property. Investors considering construction or subdividing the property should review both local zoning and building codes and pay careful attention to the exclusions and exceptions section on the title insurance commitment. These may reveal easements and other matters that might not be covered by the title policy.
Financial Implications
Even the most experienced real estate investors can be blindsided by hidden title issues. A study commissioned by the American Land Title Association states that the most frequent types of claims can cost $26,000 on average to resolve, including $5,000 to defend, with some of the most expensive claims exceeding $143,000. That alone can erase any profit from a deal. You can help protect yourself from paying these costly legal expenses out of pocket by purchasing owner’s title insurance*.
Help Safeguard Your Real Estate Portfolio
Invest with confidence through an owner’s title insurance policy. Title insurance, offered by providers like Radian Title Insurance Inc., helps protect your interest in the property as long as you own it, for a one-time premium. When you include title insurance in your investment strategy, you can focus on what you do best: growing your real estate portfolio. The most successful real estate investors don’t just identify opportunities, they excel at proactively maintaining those investments. While sharp insights may drive initial success, it’s thorough vigilance that helps your real estate portfolio thrive for the long term.
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.
* Coverage and policy terms may vary and may not be available in all states or situations; other restrictions may apply.
