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How can I find out "why" I can't purchase a house due to a "Bad Title"?

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August 01 2010 - Orlando
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If the house has a title problem that means that someone other than the seller has a claim of some form of ownership or a lean on the property. It has an old mortgage that is not paid the lender could come back and foreclose on it and you would be out of luck If someone other than me sells you my house it is still my house. You could show up with a deed from someone else and it is worthless. They do not have the authority to sell it. Maybe it is part of an estate and is now owned by 4 siblings. They all four must sign to sell. If only three sign the fourth would still have part ownership.

Never buy a property without clear title and always buy owners title insurance. I have a seller now with a problem. His title insurance will save the day for him.

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August 01 2010
@Alan,

This can occur for all types of reasons.

I had a refinance on a Restaurant located on the Santa Monica Pier. The problem was no one new who owned the SM Pier. The City of Santa Monica? The County of Los Angeles? The Army Corps of Engineers? It took Chicago Title about two months to get this handled.

Happy funding, Rudi
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August 05 2010
If you are buying ALL CASH it should not be an issue. Just not smart. Contact a Title Company and see if they can resolve the problem.

Happy funding, Rudi
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August 02 2010

Title to property that does not clearly confer ownership is "Bad Tiltle". Most frequently applied to real estate, a bad title may prevent a homeowner from selling the property. Title may be clouded by unpaid taxes or other unsatisfied liens, a faulty or incomplete certificate of occupancy, an incorrect survey, or uncorrected building violations, among other causes. Steps must be taken to rectify these problems before title to a property can be legally transferred. Also called a "cloud on title". The attorney or title agency handling the closing will have the results of the title search and should be able to address the specifics of your questions.  

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August 02 2010
The other answers are excellent and pretty much cover everything you really need to know. If you want a bit more detail read on but the conclustion is the same.

Technically, you can buy a property without clear title or with a defective title, but won't be able to secure title insurance and your ownership will be in question due to the cloud on title at the time of the transaction. That is generally extremely inadvisable and obviously inherently speculative, and you will need all cash as no bank will loan on it. Other than fraud or a seller without the capacity to sell in the chain you see 3 basic types defects with the chain of title.
1. Ones that are due to missing signatures, which may be repairable if you can get and record those signatures.
2. Ones caused by liens that the transaction will not satisfy. In some cases you can obtain subordination.
3. Ones caused because of defective real property (land). This can be for reasons such as geologic instability, soil contamination, that sort of thing or because the property is part of a condominium, Planned Urban Development (PUD), or similar project that is not solvent, in bankruptcy, or has other title issues. I am aware of some specific developments in Florida where this is the case. Generally there is no way for a non-owner to clear such a title until the development has corrected their deficiency. With substantial legal expense, in a few instances with free standing homes and not in all jurisdictions, it may be possible for an owner to emancipate their unit from the development through the courts.

So, in your case I agree with John Crea and Alan Grzzle. Consult your Realtor to find out the specifics and probably move on, unless you really want to do everything possible to obtain this specific home for a reason other than price. If you want to see if the problem is correctable escrow and title officers on your Realtor's team will be of assistance, but you will likely need to seek the advice and services of a real estate lawyer to attempt to correct many clouds (problems). Before I would go to this level of effort and expense I would make sure the owner is supporting my efforts. I would have a lawyer draw an iron clad agreement specifying damages if I am paying to remove clouds and then the owner tries to change there mind about the sale or agreed price and terms.

Bottom line is probably... move on.
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August 01 2010
The title company that is involved should be able to tell you the reason why the title isn't clear. If it isn't indicated in a preliminary search then a full search would be necessary. Consult your Realtor to see if they can help you in dealing with the title company.
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August 01 2010
 
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