When it comes to selling your home, a lot of legal and real estate jargon can go right over your head. Many of those words and phrases may not interest you, but if you hear “cloudy title” or “cloud on title,” you need to listen up.
While it can be a funny phrase, understanding what it means and how it affects the sale of your property is crucial to a successful home sale. Below is a handy guide on all things cloud title-related so that you can be well-informed and prepared for the sale of your home.
What Is a Cloudy Title?
A cloud on title, or cloudy title, is a major red flag in a home sale. It is an obstacle that gets in the way of transferring the property’s title, also known as a title defect. This can be on either the buyer’s or seller’s end of the deal and can cause major chaos in a home sale.
A cloudy title impacts a home sale when it is on the seller’s end. It can be any document or claim that invalidates the title of the home or causes doubts about the true ownership of the property. It can range anywhere from owed property or income taxes and fees to unresolved ownership claims surrounding the inheritance of the property.
A title defect is a significant issue in a home sale because it can cast doubts about the owner’s legal ability to sell the property. It can often be grounds for a deal to fall through or a buyer to back out. While a cloud on title can typically be resolved, it can take time and money spent on legal fees and proceedings to work it out, which stretches out the home-selling process and detracts potential buyers from the property.
What Can Cause a Cloud on Title?
There are many potential reasons for a cloudy title, and many of them are easily rectified. Cloudy titles are often discovered during a title search, a common condition of a home sale. Here are some possible reasons behind a title defect:
Money Owed
If the current homeowner has an outstanding debt owed to a third party, such as a debt collector or general contractor, it may be flagged as a defective title. Third parties can put a lien on a property when money is owed. In other words, the title on the house is held hostage until the debt is paid or the seller finds a buyer willing and able to take on the financial responsibility of the debt.
The most common reason for a cloudy title is that the mortgage lender has put a lien on it. This is usually because the homeowner has not made sufficient payments on the property to the mortgage lender. This can be resolved by bringing the mortgage payments up to date, either by the seller or the buyer, as part of negotiations, and must be resolved before the home is sold.
Errors in Paperwork
As with many important legal documents and paperwork, any discrepancies or mistakes in filings must be called into question before a deal can go through. Most often, the issue in the paperwork occurs after a divorce. If an ex-spouse’s name is still on the deed title, the seller may not have the full legal right to sell the property. It may be necessary to obtain permission from the former spouse or for the courts to go back and check the ruling during the divorce to ensure that the sale can go through.
You may also find that if the mortgage is fully paid off, the proper paperwork showing that no more money is owed on the property may not have been filed correctly or at all. An unreleased deed of trust or proof that the mortgage is paid in full may need to be rectified by the proper clerks to allow the home sale to go through.
Probate Issues
If property was inherited following the passing of a loved one, the details of that inherited property may need to go through probate court to be sold. This typically happens when the deceased’s wishes for the property are not clearly laid out, and the courts must decide to whom the property is left.
How Do I Know If I Have a Cloudy Title?
If you are looking to sell your home soon, having someone perform a title search on your property may be helpful. Doing this before putting your home on the market or contacting Northern Virginia home buyers can help smooth the process and reduce stress.
If you discover you have a cloudy title before you start the home sale process, you don’t have to worry about blowing up a deal, scaring off potential buyers, or complicating the home selling process. Often, you can address the title issue by paying off your debt or addressing the clerical or paperwork errors in your title.
Can I Still Sell My Home?
That depends on how serious the cloud on your title is and how open your buyer is to incurring any debt. If you choose to sell your home to a company that buys houses in Northern Virginia, you may find that they are willing to take on a bit of your debt and pay it off with the payment on the sale in order to clear the sale.
There is also the option to file a petition with the courts for a quiet title action. If your seller is not scared off by your cloudy title, you can ask the court to transfer the title to the buyer. However, as the seller, you still incur the debts that were held on the title. Essentially, this overrides any lien on the title and allows for the sale to go through.
While dealing with a cloudy title can feel daunting, understanding its causes and how you can address them will help you easily navigate the home-selling process. Check your Northern Virginia home’s title status prior to selling. You can resolve any defects to ensure a smooth, successful property sale.