How to Find Red Flags on a Title Policy

Ryan Sparks, closing attorney, taught our RE/MAX Advantage agents how to properly read a title policy and how to especially look for red flags. When we can identify issues ahead of time, we can create a better experience for our clients. Here are a few of the many tips Ryan shared with us.

1) A title commitment is only good for six months. It must be updated just prior to closing to protect the lender and the purchaser.

2) GET A PRELIMINARY policy to ensure who the owners are and how the title is held. If title is held in anything other than Fee Simple, additional research is needed.

3) If the title is a special warranty deed, the bank is only warranting the property for the time of ownership held. So, check the foreclosure date to advise your client of the one year Right of Redemption where the foreclosed party has the opportunity to re-claim the property.

4) If your BUYER is purchasing a foreclosure, ask your title company for a copy of the foreclosure deed. It is best for your client to purchase the property for LESS than the foreclosure deed.

5) Always ask the seller to provide a redemption bond when representing the buyer. But, remember, it only protects the new lender.

6) Check under schedule B for requirements necessary to transfer title. Ensure that no liens have been noted. Possible liens can include IRS, State tax liens, and medical or hospital.

7) Have a survey done prior to closing. Many title issues can be resolved with a survey, such as easements and public access.

So much more was discussed and learned, but these topics are the main points. Please read your prelim title when it is delivered. You may think the title company will alert you when the policy reports problems, but that is not always the case. And, guess who gets the blame?