BiggerPockets

Update Your Chain Of Title When You Sell A Home

Whenever I get ready to sell a house I have to provide my buyer with a form of guarantee that I really own the house and that there are no liens against it. Even if the buyer doesn't really know or care about these things, they are actually very important to him. That's why lawyers and title companies research the legal history of a property thoroughly on behalf of the current owner before a property is sold to a new owner. Everyone wants to know, especially his lender if the new owner is borrowing money, that the "chain of title" is clear.

Let me explain this subject a little more because it is one of those things that isn't interesting to most people, but can become a big problem for a seller or a buyer if it isn't done properly. I am talking about the history of a property that goes all the way back to the original owner, usually a much larger plot of land such as farm land or even the original grant from the US government. Yes, it's true, a chain of title goes back as far as records exist in the county where the property is located.

Lawyers and their legal assistants, hired by the seller or by the seller's title company, actually go back into the county records and look for anything that would "cloud the title", which means documents that were not signed, mortgages that were not released properly, or debts that were not paid and are still attached to the property. There is a long list of things that can affect the title to real estate, and none of them matter very much unless they are an issue with your particular property when you get ready to sell it.

For example, there may have been a sales transaction in the past between a seller, a man whose wife had died, and the new buyers, a husband and wife. The widower signed his wife's name to the deed in order to sell the property. Everybody knows that his wife had already passed away, and they knew he was signing her name to fulfill the requirement that both spouses sign a deed if both spouses owned the property together, but what he did will cause a cloud on the title for future transactions. When a person has ownership in real estate and that person dies, there are additional documents required to establish who actually inherits the ownership interest of the deceased person. In other words, her interest may or may not have passed to her husband, and he may or may not have had the right to pass on her interest.

Whew, it gets complicated, doesn't it? That's why people who are trained to research the history of a title to a piece of property have to check it out for me whenever I sell a house. I want to know that I have a clear title to pass on to my buyer, and my buyer wants to know that he is buying a house with a clear title. That way, everybody wins. Be sure to have a title search whenever you are preparing to sell a house.

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