Hopefully you now have a solid understanding of how title works and is transferred. When you submit your purchase contract to the title company, you’ll get the Property Report (PR) back (we discussed this in our first Keys to Title Article last month). The PR will list any problems there might be. Normally, these problems would require the sellers to fix them. But in real estate investing circles, typically the investor will at least help the sellers out in getting these resolved.

Death of an owner: If one of the titled owners (that means a person who is actually listed on county land records as an owner) has died and either there is no surviving joint tenant or the owners are tenants-in-common, then the deceased owner is not able to transfer his ownership by way of a deed. Remember, that deeds need to be signed under notary, and if the person is dead, he can’t sign. The easiest way to resolve this problem is for the deceased person’s estate to be probated. Probate is a court action where a judge can appoint a personal representative of the estate who has the legal authority to sign on behalf of the dead person.

If the deceased has a will, that does not matter. All wills must also be probated. If the deceased has a family trust, that also doesn’t matter if the trust wasn’t listed as the owner on county land records. This is very common. A family has a living trust, but for some reason they never transferred title to the trust. Probate is still required.

Divorce: If an owner of property has gone through a divorce, the divorce decree becomes very important. The decree will stipulate who gets the proceeds from the sale of the home. Title companies must follow the decree! It’s also common for divorce attorneys to forget to remove one of the ex-spouses from title. That means your seller may have to get their ex to sign the purchase contract, closing documents or a deed taking him/her off title. This can cause a lot of problems with disgruntled exes who don’t want to play nice. It can hold up your closing!

The best thing here is to have this conversation with the seller and learn upfront if he/she has had (or is going through) a divorce! The earlier you know, the sooner you can get started on resolving the issue. You may need to contact the divorce attorneys or sometimes even go back to court.

Bankruptcy: If your seller has filed a recent bankruptcy or is still in their bankruptcy, it can delay or even prevent your purchase. There are numerous types of bankruptcy, and each has its own rules about the sale of real estate. It can also depend on where in the bankruptcy process they are. Almost always, the debtor (your seller in bankruptcy) will need court approval to sell their home. This can take weeks or even months.

The best solution here, like divorce, is to ask upfront if your seller has a bankruptcy. If so, even if it was a long time ago, start working on clearing it as soon as possible. The first step will be contacting the seller’s bankruptcy attorney to inquire as to what is needed to sell the property. If further court action is needed, it can take months!

In our last article on Keys to Title, we will cover different kinds of liens that you might see on the Property Report and how to clear them.

Jeffrey S. Breglio, Esq.
Breglio Law Office and REI Mastery U
www.reimasteryu.com
jeff@bregliolaw.com
(801) 560-2180