The biggest issue when a piece of property is bought or sold is whether the title of the property is clear and marketable. Clear title means that the title has no claims or defects on it that would cause problems with the ownership or use of the property. A title search is normally done to check for title problems before the piece of property changes hands. Any problems found are listed on a title commitment, in either the Requirements or Exceptions sections. The seller is usually required to purchase title insurance to protect against any future problems with the title.
The results of the title search will not always be included on the deed and although the seller should tell the buyer about any problems, this does not always happen. The recorded deed changes the ownership of property from one person to another, but it does not always fix or list the problems that will come with that ownership. Some common title problems are:
• A previous owner died and his/her heirs have a claim to the property.
• The owner’s ex-spouse still has his/her name on the title.
• Unpaid taxes. If a previous owner hasn’t paid his or her property taxes, money may be held back from the sale to pay them or the property could be sold by the treasurer in a tax sale to pay the debt.
• The previous owners paid off their mortgage (Deed of Trust) but the release of the Deed of Trust was never recorded with the clerk and recorder’s office. As a result, it looks as though money may still be owed on the property.
• There is a mechanic’s lien on the property.
• There is an “encroachment” on the property, such as the neighbor’s new patio going two feet over the property line.
Many of these problems can be easily fixed by paying off the debt or having the person release his or her claim on the property. Title problems could cause trouble for both the buyer and seller if not resolved before the property sale.
For information on Colorado Deeds, check out “Understanding Colorado Quitclaim and Warranty Deeds”, Bradford’s Colorado Legal Series.