How Home Sellers Can Avoid Title and Legal Deal Breakers

In a real estate transaction, the focus is often on the tangible aspects of the property: the price, the condition, and the location. However, some of the most significant deal-breakers are invisible, buried in public records and legal documents. Title and legal problems are a major reason residential real estate deals can fall apart, but the good news is that they are almost entirely preventable with proactive measures.

These issues, from old liens to open permits, can emerge at the worst possible time, causing delays, unexpected costs, and even the collapse of a sale. Understanding what these problems are and how to address them before you list your property is one of the most effective strategies for ensuring a smooth and successful closing. With over two decades of experience in the real estate industry, Ralph Harvey, CEO and Lead Broker of List With Freedom explains in the video how to effectively deal with title and legal problems while selling your home.

Your Top Title and Legal Questions, Answered

With over 20 years of experience in residential real estate, Ralph Harvey, Lead Broker and CEO of List With Freedom, shares his insights on how to work through any title or legal deal breakers when selling your home.

Understanding Title Searches and Lien Searches

Before diving into the problems, it’s essential to understand the tools used to find them. When you engage a title company or real estate attorney, they will conduct two distinct but related investigations: a title search and a lien search.

A title search requires a thorough examination of all previous ownership documents which together form the complete historical record of the property. The document serves two main objectives which include confirming the seller possesses valid ownership rights to transfer the property and revealing any existing problems which affect the property ownership history. A property chain of title shows all the previous ownership transfers which have occurred throughout its history. A single spelling mistake in a name or an incorrect legal description from previous deeds will create a title problem which needs resolution before property sales can proceed.

A lien search is more specific. The process requires identification of all financial obligations which need to be settled before the property title can be transferred. The law prevents any legal property sale when a lien exists because the owner must fulfill their debt obligation.

Common Title and Legal Issues That Can Kill a Deal

These searches can uncover a variety of issues, but a few common problems appear regularly in about 7-10% of transactions.

Mechanics' Liens

The mechanics’ lien represents a major problem which developers need to resolve. This legal claim exists when a contractor or subcontractor or supplier performs work or supplies materials to your home but receives incomplete payment. The person who implemented the lien might be a plumber, an electrician, or a landscaper or the business which installed your air conditioner during previous years, for example. If you have an outstanding balance, even a few hundred dollars, they have the right to place a lien on your property, which will halt your sale until the debt is paid.

Open or Expired Permites

The situation appears as a standard occurrence which contains various complex components. Often, work was done on a home years or even decades ago, and while a permit was pulled, it was never officially closed out by the city or county.

The major issue here is that when you reopen an old permit to have it closed, the work must meet current building codes, not the codes that were in effect when the permit was originally issued. For example, a 30-year-old fence requires only basic repairs for its maintenance. But for a ten-year-old air conditioning unit, it can be a significant problem. Energy efficiency codes for HVAC systems change constantly. A unit which operates without issue will not fulfill modern requirements even though it operates without any problems. You can’t make an old unit more efficient, which leaves you in a difficult position. The buyer needs to request either a credit or reduced pricing because they will need to buy a replacement item in the future which would create an intricate negotiation process.

Boundary Disputes and Survey Issues

The physical limits of your property area represent a typical yet difficult title problem to handle. A property survey is a legal document that defines the exact dimensions and borders of your land. The ownership of property becomes invalid when your neighbor builds their fence past your property boundary by two feet or when shared driveway access lacks proper legal documentation to establish an easement. These disputes often come to light when a buyer obtains a new survey. The process of solving these issues requires either legal contracts or physical relocation of buildings or it may lead to court battles thus you need to know your property boundaries before starting the listing process.

Other Title Defects and Liens

A property search will show problems which extend past mechanics’ liens and permit issues because it can detect unpaid property taxes and code enforcement violations and judgments which have been attached to the owner’s property. The title becomes unclear when any of these elements appear so they need to be addressed.

How Long Does It Take to Resolve Title Issues?

The duration needed to solve title-related issues depends on the complexity level of each specific problem. The process of paying off a small mechanics’ lien which has no disputes could require only a few days to resolve. The process of resolving title chain breaks and estate matters involving multiple heirs could require a minimum of six months to complete. The process for closing an open permit for minor work could take one week but major system updates which need code compliance would extend the process into a longer period. The closing process duration depends on your ability to resolve the current unclear matters which need immediate attention.

The Financial Impact of Title Problems

The process of solving title problems requires expenses which could span from $300 to $30,000. The seller must pay for title correction expenses because they need to give the buyer correct ownership documents. The costs from these issues surpass their actual monetary value. The absence of a solution to these issues will result in reduced property value because potential buyers will ask for price reductions to handle both present and future costs. The cost of a pre-listing title search amounts to several hundred dollars yet it provides better value than the expenses which will arise from price reductions and legal fees during a closing deadline.

What Happens If Issues Are Discovered After Listing?

The detection of title defects during accepted offer periods leads to major problems which impact all aspects of the transaction process. First, you must reveal the problem to the buyer after its discovery becomes known. From there, you will need to negotiate a solution. The solution process demands financial investment for repairs because the buyer will either accept the defect through price reduction or both parties need to prolong the closing period to find a solution. In a worst-case scenario, if a solution cannot be agreed upon, the buyer may have the right to cancel the contract, forcing you to resolve the issue and start the listing process all over again.

The Proactive Solution: Your Pre-Listing Due Diligence

Fortunately, there is a simple and highly effective way to prevent these issues from derailing your closing: get a title search and lien search done before you list your property. You should reach out to your preferred title company or real estate attorney before starting the process to discover any existing problems which you can fix at your convenience.

Take Control of Your Transaction

Title and legal problems can be a major source of stress and can jeopardize a home sale. The list of deal-breakers includes issues which you can identify and solve through basic proactive measures. The process becomes under your control when you perform a pre-listing title and lien search because it helps you achieve a clean title which leads to a successful closing.

At List with Freedom, we will help navigate you through every step of the home selling process. Your sale process will benefit from an experienced team which will help handle both title and legal document preparation and final sale term negotiations. At List with Freedom, we provide expert guidance and a flat-fee MLS listing service that helps you sell your home with confidence while saving money.

If you’re ready to take the next step, learn how List With Freedom works and begin the process of listing your home!