Title Insurance: Solving the Quit Claim Quandary

 

I had two transactions that I was working on recently that ran into major roadblocks just prior to closing.  Both issues had to deal with clouds that existed on the titles of the property.

In the first transactions I was dealing with a family who had owned the property for 40 years and wanted to sell. Ms. E called me to help them sell the home and told me that her son, Mr. D, would be signing for the transaction.  However, when I looked at the county records, I discovered that a Mr. F and Mr. L were on title.  She explained that Mr. F and Mr. L were deceased and that she had the right to the property via court order through probate.  Another interesting caveat is she did not want the proceeds of the property to go to her because it would affect her SSI payments.  So, she wanted Mr. D, her son, to be the seller.

As it happens, we had to get proof from the court (i.e. Letters of Administration or Letters of Representation) that indicated that Ms. E had the right to act on the property.  Our plan was to have Ms. E Quit Claim Deed the property to Mr. D and then have Mr. D sell the property in the normal way via a Warranty Deed.  He would have the proceeds of the sale go to him. 

In this case, having a title company put the pieces of this puzzle together is essential.  As we will see in this next example, things don't work out so well when they are not used.

Our second example involves a family who has owned a property for 30 years.  In this situation, a Mrs. S sold a property to Mr. and Mrs. P and a third person who we will call Gretel.  Several years later Mr. and Mrs. P transferred their 2/3rds interest in the property to a trust they had created.  Meanwhile, Gretel still retained her 1/3rd interest in the home.  About 10 years later Gretel deeded her interest to Mr. and Mrs. P.  Now this would seem fine and dandy except that a recent title company review of the file revealed that there was a flaw in the Quit Claim Deed used to tranfer Gretel's interest.  The first problem was that the Quit Claim Deed didn't convey the interest to the Trust but to Mr. and Mrs. P specifically.  The second was that it did not distinguish what kind of ownership Mr. and Mrs. P would hold the property.  Typically the deed will explain whether it is sole ownership, tenants in common, joint tenancy, etc.   

None of this would be a problem if Mr. P had not passed away.  However, since he did, that meant that half of the 1/3rd interest in the property needed to go to probate in the courts.  This one little detail has delayed the transaction at least a month while the courts sort out the issue.

The bottom line is that title companies and title insurance are important for a transaction.  Had these folks in our second example used a title company to convey ownership rather than writing it up themselves, this problem could have been avoided entirely.  A word to the wise.

If you have questions about title and how it affects your property, contact me.