Buyers and sellers alike often wonder why it takes so long to close on the purchase of a property. While most know the home’s inspection takes time, other essential steps must take place, too. For instance, before the transaction ends, the buyers may run a title search to ensure there are no liens, fines, or other issues with the property.
Because a title search requires a lot of fact-checking and background searches, they can prove time-consuming. This is why many homebuyers work with real estate lawyers. These professionals can work to promote a smooth transaction and ensure no pre-existing problems hinder the process.
What Happens During a Property’s Closing?
To understand why it takes so long to close, it’s good to know what closing entails in the first place. Closing itself is fairly straightforward. You and the involved parties sit down and finalize the sale’s paperwork. Thanks to today’s technology, you don’t even have to physically attend this meeting; you can schedule a video signing where the involved parties meet.
At closing, you officially purchase the home, and the other party gets paid. Your meeting will likely last anywhere from one to two hours. While closing itself isn’t a long procedure, the steps getting to closing can prove arduous. To resolve your transaction efficiently, it’s wise to consult a lawyer on your next steps.
The Title Search Is an Important (Yet Time-Consuming) Part of Closing
A title search is essential to closing on a real property purchase. It is not a complicated or expensive task, but real estate attorneys advise never to purchase property without one. Without conducting a title search, it is possible that you will buy an unmarketable title. This could result in losing your property and the money you invested unless you take certain steps beforehand.
A marketable title is necessary to buy or sell a property. This means the property has a clear title, and there are no other claims of ownership. An unmarketable title is one reason why many sales fall through just before closing. When this occurs, it is likely because the attorney or a title company discovers a problem with the property’s ownership during the search.
What Happens in a Title Search?
During a title search, the law firm or title company will:
- Search the history of the property
- Look for legal documents regarding the property
- Examine its sales history for the last several decades
- Ensure all previous transactions were legal and handled properly
- Check to ensure all paperwork is in order to document possible concerns
A title identifies the party or parties who own the property in question. When someone sells real estate, they transfer the title to the new owner at closing. This makes the sale official. However, this is not possible when other parties also claim full or partial ownership of the property.
How Long Does a Title Search Take?
What may initially appear as a straightforward title search could quickly get confusing especially if there are multiple parties involved. Generally, this process takes a few days, but in some cases, it could prove longer.
Some people choose to forgo a title search because they want to quickly close the transaction. This is not to their benefit. If an issue comes up with the title down the road, the buyer could lose the property or face other financial repercussions. While a prompt resolution is ideal, taking the time to conduct a title search could prove invaluable in the long run.
Why Is a Title Search Vital for Closing on Property?
To have a valid real estate sale, the property must have a marketable title. If there is any dispute over who should benefit from the proceeds of a sale or who can authorize it, this could jeopardize the deal. This is the purpose of a title examination. The lawyer handling the process wants to ensure only legal sales occur. The only way to do this is through a title search and only allowing closing when the property has a marketable title.
Many issues create encumbrances on real property. That is, someone else could claim the land or proceeds from the sale. Finalizing the sale requires dealing with these issues and clearing the encumbrances before moving forward with closing. A failure to do so could create a mess for both the buyer and seller later.
Some issues that a title search may uncover include:
- An unpaid mortgage without proper paperwork
- Liens from banks or other institutions
- Code enforcement liens
- A previous owner who passed away without a will
- An invalid will or documents showing ownership
- Forged or coerced signatures
- Questions of ownership held up in the legal system
- A previous transaction that was handled incorrectly
If the attorney uncovers a problem, they need to uncover what occurred and if there is any option to clear the encumbrance. Depending on the circumstances and the contract details, this could delay closing or even invalidate the contract agreement.
Why Is a Clear Title Important for Both the Buyer and Seller?
A clear title shows that the current owner holds the property free and clear, or at least there are agreements in place if they have an outstanding mortgage or other similar claims to the property. This gives them marketability, meaning they have the right to offer the property for sale. This is essential if they want to move or sell the property for another reason.
A transaction that occurs when the seller has an unmarketable title will not be valid. Another party could have a claim to the property, and this often leads to lawsuits and other problems for the new owner, the previous owner, and the party making a claim to the property. The party making the claim sues the buyer, who in turn sues the seller. No one wants to be involved in this situation.
For the seller, a title search greatly reduces the risk of this occurring later. The real estate lawyer or title company discovers any issues upfront instead of waiting months or years to learn otherwise. This allows them to deal with the issue now or prepares them for future problems.
Who Handles Issues That Arise During the Title Examination?
When possible, real estate attorneys work with agents, sellers, buyers, and other involved parties to resolve any issues with titles. They want to keep closing on track and complete the sale if circumstances allow it. For example, they might identify a lien against the home and have the seller pay the amount owed before proceeding.
There are sometimes easy solutions to title issues. Documents signed by the parties involved or other paperwork often takes care of relatively minor issues. Smaller liens frequently get paid. Some encumbrances are relatively easy to resolve, while others are almost impossible or extremely expensive and time-consuming.
A Lawyer May Recommend Not Proceeding if There’s a Title Issue
Sometimes, the buyer might not want to wait for the seller to deal with a title issue, especially if it requires going to court or dealing with significant ownership disputes. There is generally a time limit built into contracts. If closing gets delayed significantly or postponed until further notice, this stipulation could void the contract.
If this happens, the buyer could opt to:
- Agree to wait for a longer period, included in a new contract; or
- Look for another property to purchase
Generally, the sooner there is a clear title and the parties can schedule the closing, the better. Many buyers do not want to wait for months or even years while families sort out an estate or deal with other serious title problems. They reasonably want to close on the property and move in as soon as possible.
Getting Title Insurance Is a Wise Step Before Closing
Title insurance protects the homebuyer from the unexpected. For instance, an attorney can do everything possible to research a property’s title and look for problems. Yet, if they make a mistake (or something comes up), this could spell trouble for the buyer. Title insurance gives the buyer an opportunity to recoup their losses in this scenario.
Buying title insurance is relatively straightforward. Rather than paying monthly premiums (as you would with other insurance policies), you pay once for the policy. Your attorney handling the closing might recommend investing in additional coverage if you plan to improve or remodel the structure, add on to the house, or build a new house on the property. That’s because any claim to the property would include anything built on it.
Buyers Have the Most to Lose if a Property Has an Unmarketable Title
As a potential homebuyer, you’re extremely vulnerable if a title issue arises. Any conflict could lead to lawsuits, additional searches, and other bureaucratic headaches. Even if you “win” your case, you could spend thousands on court fees. Having a lawyer conduct a title search from the get-go can save you time, money, and frustration.
Without having a lawyer conduct a title search, there is no way to ensure the property has a marketable title. If there is another party with a claim to the property purchased, they could show up later and challenge ownership. They might want to sell the land themselves, move into the home, or otherwise act in a way that disrupts your life.
What Other Factors Make Closing Take So Long?
Title searches are just one reason why closing on property sometimes takes a long time. Other time-consuming factors include:
Communication Issues
There are many people involved in a real estate transaction, including (but not limited to) the buyer, the seller, the involved lawyers, the real estate agents, and inspectors. These parties must communicate well for a transaction to go smoothly. Waiting days for a single response can make a once straightforward closing more cumbersome.
The Property’s Inspection
When many think about the time between a property going under contract and closing, they think of the home inspection. This is an important step in the process and more time-consuming than most realize. If a home inspection uncovers a significant problem, the parties need to discuss their options for repairs.
Some common options include:
- The seller makes the repairs.
- The seller reduces the price.
- The seller offers additional benefits instead of reducing the price (such as installing new appliances).
- The buyer doesn’t move forward with the sale.
When an attorney handles the title company work and closing, they can advise a buyer on their options following a home inspection.
Contract Agreements
Some contracts also have stipulations and contingencies that can delay closing. For example, a seller might not officially want to sell their home until they’ve purchased a new domicile themselves. This “waiting period” could delay closing anywhere from a few weeks to a few months.
When you work with a lawyer, they can review any contract details that make for a slow transaction. They can also advise you on whether a contract benefits your goals.
Issues With the Property’s Appraisal
A property’s appraisal plays a big role in closing. For instance, an appraiser might find that a buyer has entered a bidding war, offering much more for a property than it’s worth. On the other hand, a seller might put their property on the market for dirt cheap great for buyers, but possibly bad for the seller.
These issues can stall closing for weeks. When you work with a lawyer, they can ensure all appraisals are in order and explain your options.
Talk to a Professionals About a Title Search on Your Property
Ensuring you have a free and clear title before closing on a new home is essential for your peace of mind and financial investment. Real estate lawyers perform title searches, help navigate issues, issue title insurance, and take other steps to help ensure the sale goes smoothly.
If you have questions about closing, need help with a title search, or have other related concerns, an experienced Vero Beach attorney for real estate buyers can explore your options.