Quick Answer
When a title search finds a problem, the title team investigates the issue, determines what is required to resolve it, gathers supporting evidence or documentation, works with underwriting when needed, and either clears the requirement or handles it through the title insurance policy. Most problems can be resolved before closing.
Discovering a title problem can be concerning, but it is rarely the end of the deal. Here is what happens step by step when a title search finds an issue.
Step 1: Identify the Problem
The title examiner identifies the issue during the search or examination. This could be an old unreleased mortgage, a tax lien, a judgment, an heir with a potential claim, or any other matter affecting the title.
Step 2: Determine What Is Required
The title company determines what documentation or action is needed to resolve the issue. For an old mortgage, a release from the lender may suffice. For a probate issue, completion of probate or an affidavit of heirship may be needed.
Step 3: Gather Evidence
The title company works with the parties to gather the necessary documents. This may involve contacting prior lenders, searching for old records, obtaining court documents, or working with attorneys to prepare corrective documents.
Step 4: Work With Underwriting
For complex issues, the title company consults with the title insurer's underwriting department. The underwriter determines whether the issue can be insured over (with or without special conditions) or whether it must be fully resolved before the policy can be issued.
Step 5: Resolve or Insure as Permitted
Once the issue is resolved (or the underwriter agrees to insure over it with appropriate exceptions or conditions), the requirements on the title commitment are updated, and the transaction can proceed toward closing.
Example: The Mortgage That Was Already Paid
A common scenario: the title search finds an old mortgage from 15 years ago that was never released. The homeowner paid it off, but the release was never recorded. The title company contacts the lender, requests a release, the lender provides it, it is recorded, and the cloud is removed. The closing proceeds on schedule.
Will It Delay Closing?
Some issues can be resolved in a day. Others take weeks. The timeline depends on the complexity of the issue, how quickly the parties respond, and whether court action is needed. Starting the title process early gives the best chance of resolving issues before the scheduled closing date. An experienced title company knows how to navigate these situations efficiently.
Key Takeaway
Finding a title problem is not the end of the transaction. Title companies deal with issues every day and have established processes for resolving them. Most problems are resolved before closing. The key is working with an experienced team that knows what to do.
FAQs
Who pays to fix title problems?
It depends on the problem and the purchase contract. Typically, the seller is responsible for curing title defects that existed before the transaction, especially if the contract requires marketable title. Some issues are handled through title insurance rather than being fully cured.
What happens if a title problem cannot be resolved?
If a title problem cannot be resolved and cannot be insured over, the transaction may not close. The purchase contract usually addresses this situation, often giving the buyer the right to terminate and recover earnest money. However, true deal-killing title problems are rare, especially when experienced professionals are involved.