Good Afternoon —
In last week's newsletter I asked you to weigh in on what some of the biggest day-to-day challenges are for a title or closing agent and if they are in fact "unexpected delays" as reported in the 2021 State of the Title Industry Report by PropLogix. According to the title professionals that responded, things that constitute "unexpected delays" are definitely some of their daily challenges, and as I suspected, there are a myriad of issues that could pop up causing the closing process to be delayed.
From the responses I received, issues that throw a wrench in the closing timeline can vary from receiving last minute closing instructions or documents from lenders, lack of communication between the parties causing important documents to be delayed, parties showing up unprepared to the closing and having something pop up on the title search.
Coming from a purely technical standpoint, I know that liens, easements and encumbrances can pop up when doing a title search, but I wanted to know what these things look like in the field. I asked title industry veteran and Doma VP of strategy, Dominic Fahey, what title searchers typically find when performing their search.
According to Fahey, one of the most common issues to arise is a prior mortgage on the property showing up as having not been cleared up. He said that when this happens, the title company just has to contact the mortgage lender and have them record a release, which typically only takes a few minutes.
"There may also be an easement across the back of a property that could affect the buyer's intended use of the property, so the buyer tries to negotiate a lower price, which could possibly kill the deal," Fahey said.
On the longer and more costly side of things, Fahey said, are issues involving riparian rights, which he said pop up from time to time in his native New Jersey. Riparian rights are traditional rights that attach to waterfront property. Due to the fact that the property meets the shoreline, riparian rights give waterfront property owners the right to access the water and use the water in front of their property.
Sometimes, however, the state can claim ownership to the portion of the property that meets the shoreline, creating a riparian lien. If a title search shows that there is a riparian lien on the property that hasn't been satisfied with the state and the current homeowner has not petitioned for a grant from the state, then the homeowner and the state need to clear the lien before the sale can be closed.
"In this scenario, the property has probably appreciated pretty significantly and so the home seller is entitled to quite a bit of money, maybe even a couple $100,000 depending on the size of the claim," Fahey said.
Once the amount is established, in Fahey's New Jersey example, the funds are then put into escrow and the seller must petition for a grant from the state, which can take anywhere from months or years to be issued. After the grant is issued, its cost is deducted from the escrow amount and then the balance is refunded to the seller. While this clearly could be profitable for the home seller, it certainly seems like a major headache and would definitely be an unexpected delay.
Until next week,
Brooklee Han
Real Estate and Title Reporter
bhan@housingwire.com
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