There are two different types of liens against homes — voluntary liens and involuntary liens. Voluntary liens are security interests that have been granted by the owner, such as a mortgage. However, there are many more types of involuntary liens on real estate than voluntary liens. Below we discuss the different types of liens that may be filed against a home.
Nine Different Types of Liens
Any of these liens can create a cloud on the title making it impossible for the owner to transfer clear title to the property.
• Mortgages — When most people purchase a home, they typically borrow a portion of the sales price. The document filed to secure the loan with the home is a mortgage. Homeowners can have multiple mortgages on a single piece of real estate. If a mortgage has been paid, but not satisfied of record, someone must contact the mortgage company to request that the company research the account to determine if the lien can be canceled. This process can be time-consuming and frustrating, especially for mortgages that have been sold or assigned. Another issue that can make the process difficult is when the bank has closed or changed names.
• Equity Line — An equity line is also a mortgage, but it allows the homeowner to access the equity in the home. Even though the homeowner may have paid the equity line in full, as long as the mortgage is recorded, it is a valid lien on the home.
Buying a home is a major event in a person’s life. Beyond the basic shelter it provides, a new home purchase often signals a turning point in our lives, one that makes us crave a more permanent space to make our own. It often happens at a time when we are tired of renting small apartments that no longer provide what we need. Choosing a home is a difficult decision to make and, often a much more difficult plan to see to fruition. With so much time and money involved, we hope things will come together quickly, so that the home we want will be ours. In such an important process, mistakes are sure to occur that slow things down. Even though the house you want to purchase will be new to you, it already has a history. To establish a clear title on a property, a title search will need to be completed. One frequent problem during the title search, is an error in public records. What effect can a public records error have on the deed in question?
During a title search, both municipal and county officials will check any documents that are associated with the property. This includes street assessments, sewer assessments, judgements, special taxes and assessments, along with any other documents that have to do with the title. Although these are official government documents, sometimes human error can cause a problem during the title search. Errors in spelling, wrong address, inaccurate property description, and incorrect information can all influence the deed and cost you unexpected fees. One example of an error in public records is a property description that seems to be correct, such as the square footage of the house. Banks only offer 80-90% of the home’s appraisal value and if the square footage of the home is not the same as that listed in the documents concerning title, the homebuyers may run into problems with the loan amount. The buyers may find themselves unable to get the loan amount they need, leaving them unable to buy the home. Mistakes in the filing of documents, pending legal action, or undisclosed mortgages can also add to a homebuyer’s problems. With all these issues and more, how can you avoid public records errors when buying a home?
The truth is, you cannot completely avoid errors in public records since you do not have control over the history of a property you wish to buy, and you certainly cannot control a mistake that may have been made decades ago. However, there is one thing that can protect your rights of ownership from errors that are found in public records. A Lender’s Policy only protects the loan, not the property. A homeowner’s title insurance policy from Heights Title Services, LLC will protect you for the whole time you own your home. The only time your coverage decreases is when you make those changes to your policy. Depending on the coverage you choose, this may cover the legal costs you may incur while defending your interests and the losses you sustained because of a title error.
At closing on a new home loan, you may see paperwork concerning title insurance for the lender. This insurance protects the lender against the validity of the mortgage and secures their investment. You may think that this protects you, as the mortgage holder, but it does not. There are several reasons that a newly built home needs title insurance – chiefly, to protect you, the homeowner.
You might not be the first owner
Even though your home is new construction, and you purchased the lot for the house, you may not be the first owner of the property. In fact, your plot may be a parcel of larger acreage, one that has changed hands several times before being developed. Title insurance guards you, the homeowner, against liens against the land itself. The title search conducted as part of your insurance appraisal will determine the validity of your purchase, as well as the legal ability of the seller to sell to you. The survey of your property will legally establish the boundaries of your ownership.
The builder may owe money on your house
https://heightstitle.com/wp-content/uploads/2018/01/home-needs-title-insurance.jpgIf a builder hasn’t paid their suppliers or vendors, these companies may place a lien against the physical structures. This lien, while against the builder of your house, is still placed on your home. While you may have purchased the home from the builder in good faith, a lien on your property will affect your ability to sell your home in the future.
Mechanic’s liens against your property come from companies such as roofers, electricians, and plumbers. These actually attach to the real estate itself, rather than the builder’s company. When you sell your house in the future, or your heirs do, if these subcontractors haven’t been paid by the builder, it’s your own house that has the unresolved debt attached.
Owner ‘s Title Insurance protects your home forever
While the lender may purchase a Lender’s Policy, that only protects their loan. The coverage for the policy drops as the amount of the loan decreases. A home owner’s title insurance policy, however, is in place for the entire duration of your home ownership, and the coverage won’t decrease unless you personally make changes to the terms of the policy. The bank’s title insurance protects their loan only.
Your personal title insurance will identify any risks before a transaction on your property is completed, and if a claim is discovered, the insurance policy should cover it, along with any court costs and fees.
Options for enhanced insurance
At the time of closing, you’ll pay a one-time premium for your title insurance. You may opt for standard coverage, which protects your house against mechanics liens and the like, as well as your investment. You may also have an option (this varies by state) to purchase enhanced coverage. This protects against undiscovered encumbrances, such as zoning issues, fencing disputes, and even mineral rights. It even protects you, the homeowner, from building permit violations created by your home builder (please note – this doesn’t cover any DIY projects that you complete on the home).
Purchasing title insurance on a newly built home is an added level of protection for one of your most valuable investments. Call Heights Title Services and speak with our team for recommendations. Investing in protection now may save you a lot of headaches in the future.
Buying a home or a piece of property may seem like a fairly straight forward thing. Someone owns the land, you buy it from them, then you own the land. Unfortunately, there are many title issues that can keep you from using the land the way that you see fit. Unknown Easements and Undiscovered Encumbrances are just two of these issues. Let’s take a closer look at what each of them are.
Some of these issues may have come about during the previous owners ownership, and while they were grandfathered in, and the issue wouldn’t have effected them, once the title changes hands, the issue will effect you as the new owner.
https://heightstitle.com/wp-content/uploads/2018/01/undiscovered-encumbrances.jpgAn easement is a right to use and/or enter onto the real property of another without possessing it. In Southwest Florida this is typical with many cities retaining rights for storm drains and sidewalks along the street. When I was growing up in Cape Coral we use to say that the city owned the first 15 feet onto your property. Well they don’t own it, there is just an easement.
Some lesser known easements that you could run into could be a historic preservation easement that can restrict alterations to a historic building, or a conservation easement that can limit development on a piece of property to help preserve the environment.
Utility easements can also be common in Southwest Florida where one piece of property does not have direct access to a utility (like sewage), so their pipes are run under a neighboring property. This type of easement can easily be overlooked as in many cases the original work was done many decades ago, and the easement may have never effected the current owners. However, if the new owners are planning a remodel or expansion of the home, this type of easement could be very costly.
An easement is actually a type of encumbrance. So, unknown easements are actually undiscovered encumbrances.
Liens are also encumbrances, however liens are usually taken care of from the proceeds of the sale of the home, and not passed on to the home buyer. A lien may come from a bank, or a contractor who wasn’t paid for work they did on the property. Tax liens are also common.
Deed restrictions are another form of undiscovered encumbrance that can be found often in Southwest Florida. Many gated communities have deed restrictions that can restrict many things to protect property values. These things can pertain to where you are allowed to park cars on the property or where you can place a satellite dish, down to landscaping details.
Another type of encumbrance that is usually discovered when the property is surveyed is encroachments. These encroachments tend to be when a fence goes over a property line, and can even be when a tree on one property has branches that hang over another property. In some cases the adjacent owner can ask for an encroachment to be removed, or request compensation for the encroachment. This can hold back a sale, or reduce the value of a property.
Protecting Yourself From Undiscovered Encumbrances
A title services company, like Heights Title, will research a property and title and be able to find any undiscovered encumbrances or unknown easements before the sale of the home is final. These are just a few title problems that can up when a home is bought and sold. Make sure you have someone do the research before you transfer property.
Many people choose to retire to Southwest Florida for its beautiful beaches and senior-friendly amenities. Warm weather and less crowded shores than the state’s East Coast make Ft. Myers, Naples and Cape Coral attractive prospects for retirees looking to buy a dream home for their golden years. When buying a retirement home in Southwest Florida, one of the many things to consider is what type of title insurance to purchase to avoid any questions of ownership that could overshadow a happy retirement.
Why You Need Title Services
Title insurance protects the buyer and lender from any doubts as to the seller’s free and clear ownership of the property. Once title is cleared, there is no doubt that ownership can be legally transferred to the buyer.
Here are some of the issues that can challenge your ownership if a title services search isn’t made.
Unpaid past mortgages and liens
Easements that impact property boundaries or transfer of title
Pending litigation against the owner
Most of the premium covers the cost of the search, but a portion of it go to protect you from losing your money if something comes up that wasn’t uncovered in the title search.
Types of Policies
Before acquiring title services for your retirement home in Southwest Florida, it’s important to understand what’s covered in each type of policy.
Lenders Title Insurance. Lenders title insurance covers situations where you lose your home to an unknown lien. This policy only pays off the remainder of your mortgage.
Owners Title Insurance. This policy covers the purchase price of the property. If you wish to cover inflation, you’ll need an enhanced policy or inflation rider, which covers any liens filed after the closing date.
How Does It Work?
There’s a one-time fee, unlike other insurance policies. It’s rare that the title company has to pay out a claim, since they spend a lot of time researching whether any skeletons will fall out of the closet after you purchase your home. It’s in the title company’s best interest to protect you and themselves from liens and other ownership disputes against any former owners.
Also unlike other insurance policies, your title services include an active role in protecting your interests. During the escrow phase of your purchase, the title insurance company searches through public records to ensure that no one else has a viable claim to your property. The title company scours through wills, deeds and trusts to trace the history of the home back as far as possible.
Back to More Important Things
Protecting yourself with title insurance makes sense. It’s worthwhile to find out as much as you can about the history of your retirement home is Southwest Florida. Choose a title company with a proven track record in the area and with the appropriate experience in title searches and challenges. That way, you can get back to more important things, like margaritas on the beach and salsa lessons.