If you are interested in purchasing a property or selling it on to someone who is looking at it, one of the things you need to have done is a title search. The title search can reveal all kinds of problems with the title in the form of a cloud.
A cloud on a title is not a good thing, but it is informational. A cloud may mean that the title is not currently valid or is questionable. It may also mean that there is an unreleased lien or other encumbrance on the title that may stop a sale in its tracks.
Where does a cloud on a title come from?
A cloud on a title may come from different sources. In most cases, the cloud comes from an unresolved problem with the property, such as a lien on the property or foreclosure proceedings.
For example, if a contractor performs work on a property but the client doesn’t pay, the contractor may ask a court to place a lien on the property as collateral. A property owner may also use the home as collateral to obtain financing for additional purchases, and the lien will stay in place until that loan is covered.
Another possible cause of a cloud on a title is a problem in probate court. If the owner of a property passed away, then estate-related matters could make it so that the home cannot be sold until they’re resolved. For example, if there is a question about inheritance or who the home belongs to because a death certificate was lost, then that question will have to be answered before the cloud can be removed from the title.
Can clouds on titles be resolved?
Yes, they can be resolved. Usually, clouds are resolved using quitclaim deeds, which are non-warranty deeds that help resolve the encumbrance and allow a purchase or sale to move forward.
It’s important to be sure that a title is clear before you purchase a property. Working with someone who can clear the title, perform title searches or help with title insurance policies may help you avoid trouble in the future.