Title Considerations for Distressed Properties

Distressed properties can offer excellent investment opportunities, but they often come with complicated title histories. Understanding what title problems are common in distressed properties helps investors evaluate risk and plan accordingly.

Investors See Opportunity, Title May See Three Liens, a Deceased Owner, and a Divorce Decree

A property that has been vacant, neglected, or passed through multiple hands may have accumulated title issues. The investor sees the potential after rehab. The title search may reveal multiple mortgages that were never released, unpaid taxes, a prior owner who died without probate, a divorce decree that was never reflected in the title, judgments against former owners, and easements or restrictions that affect the property.

For more on common curative work, see Title Problems and Curative Solutions.

Common Distressed Title Issues

• Unreleased mortgages: Old loans that were paid off but never formally released from the public record.
• Deceased owners: Owners who died without transferring title through probate or a proper estate process. For more, read what happens when an owner dies before selling.
• Tax liens: Unpaid property taxes that have become liens on the property.
• Judgments: Court judgments against prior owners that attach to the property. See what is a judgment lien.
• Chain of title gaps: Missing or incorrect transfers in the ownership history. See gap in chain of title.
• Old liens never released: Liens that were satisfied but not released. See what happens when an old lien is never released.

Cheap Does Not Mean Simple

A distressed property purchased at a significant discount may require significant title curative work. The lower purchase price can make the investment attractive, but the title cost and complexity should be factored into the overall deal analysis. An experienced title company can help evaluate what issues exist and what can be resolved.