Billion-Dollar Title Troubles
The Hidden Costs in These Two Investment Markets
by Radian Title Services
Maximizing your returns may lie in finding the right properties and carefully managing every step of the acquisition process.
Few things can interfere with a deal quite like title issues during closing, and some real estate markets grapple with more title challenges than others. Some surprising examples include:
Philadelphia, Pennsylvania
Philadelphia is a prime example of title issues plaguing certain real estate markets. According to a 2021 study by the Pew Charitable Trusts, more than 10,400 homes in the city have unclear legal ownership, collectively valued at over $1.1 billion. These issues may be the result of factors like informal property transfers, abandoned homes, and tangled probate processes.
The study found that these unclear titles create substantial barriers to investment and redevelopment since properties with clouded ownership may be more difficult to sell or improve.
Detroit, Michigan
The Motor City has been synonymous with abandoned properties, but the title issues plaguing Detroit go beyond just vacant homes.
A 2024 analysis by Detroit Future City found at least 5,525 residential heirs’, also known as “tangled title” properties in Detroit. Tangled title properties are those where property ownership is unclear due to informal transfers between family members or improper documentation. It is estimated that $268 million of real estate value is tied up in these properties.
In addition to the tangled titles, this market can include foreclosures and murky property histories, which may significantly slow down and complicate closings for investors.
Patterns of Change
Both cities have experienced significant demographic and economic shifts that may have also impacted property ownership records. Whether it’s population decline, neighborhood transformations, or changing patterns of home transfers, these broader trends have left a legacy of complex and often unclear ownership histories.
For real estate investors, navigating these title complexities requires both patience and savvy. Deals can face delays while working to untangle complex ownership histories, locate missing documentation, and obtain clean title.
Even after a thorough investigation, there is still the possibility that unexpected issues could emerge.
The Path Forward
Approach these markets with diligence and make sure you have thorough title searches conducted. Securing comprehensive owner’s title insurance can also be a great idea when investing, especially in these markets or others that may represent more complex titles than others.
An owner’s title insurance policy can help protect your investment long after closing against adverse ownership claims that might have been missed during the review process or were not recorded in the public records.
Providing yourself with the right protections and working with experienced professionals, like those at Radian Title Insurance Inc. or Radian Settlement Services Inc., can help minimize risks and maximize rewards, even in markets grappling with extra title troubles.
