13 Scary Ways You Could Lose Your Home After Closing

ways you can lose your house after closing

You’ve closed on your new home and gotten the keys. You’re now a property owner! Or are you? Even if you’ve had a clear title search, these sneaky hidden issues could affect the title, creating issues that keep you from selling or even affect your legal ownership altogether. They are rare but they do happen, and you should be aware that problems like these might come up even after your deed has been recorded.

1. Undisclosed But Recorded Party Wall

Row homes that were attached by a common wall, also called a party wall, were a very popular construction style in the early 19th century. Each owner has an easement for their side of the wall and there’s usually a recorded covenant or declaration of the provisions covering the party wall which are attached to the title.

If changes are made to the home, for example combining units or removing the party wall but the recorded declaration still exists, it could cloud the title and cause headaches later on when you try to sell.

2. Deed Signed By Mistake

How could someone sign a deed by mistake? Well, if they didn’t know what they were signing or thought they were signing something entirely different and never meant to transfer their property, they could have a claim of non est factum (Latin for “not his/her deed”), which would void the warranty deed transaction.

This could happen if the seller has a disability like blindness or is illiterate, meaning they have to rely on someone else to tell them what they’re signing. You can avoid this by making sure you have a trustworthy closing agent who will make sure all parties understand all of the documents, but if a deed was signed by mistake in the past, it could still affect your title in the present.

3. Secret Environmental Liens

There could be hidden liens that the initial title search never uncovers. Federal law gives the EPA the authority to

attach a lien on private properties if the federal government has spent money on for environmental cleanup. Usually this would affect a Superfund site contaminated with hazardous waste, but there’s also a provision allowing all of that site’s owner’s property to have a lien attached until the cost of the cleanup is paid back.

This could include investment or residential properties that were owned by the same person or corporation that caused the contamination. These liens are difficult to discover and can be extremely costly, but luckily it’s something that can be covered by an owner’s title insurance policy, giving you peace of mind.

4. Alias Or Fake Name Used By Predecessor In The Chain Of Title

The chain of title is the legal history of a property from the original owner all the way down to the current one. It’s important to be able to trace the complete line of ownership, and if someone in that chain used a fake name or an alias when signing the deed, it could mean that deed was not legally transferred – which means that you don’t actually own the property.

5. Deed Signed By Someone Who Is Mentally Incompetent

Anyone signing a legal document must be of sound mind. If the homeowner is mentally incompetent or unable to understand what they are signing due to mental disability or illness, it’s not a legal signature. This one can be hard to discern even if the seller is sitting across the table from you at closing, as only a medical professional can diagnose someone as mentally incompetent.

This type of title issue typically comes up later on, if someone like a potential heir challenges the property sale in court, and they’ll have the burden to prove the seller wasn’t able to sign because they were incompetent. However, it is something you should be aware of especially if you are buying from someone who seems sick or is very elderly. Talk to your closing agent if you have concerns about anyone signing the documents during your settlement process.

6. Missing Person Who Was On A Previous Title Later Appears

People who own real estate and are listed on titles and then suddenly go missing is not an uncommon situation. Often it’s an estranged spouse who just disappears one day, or perhaps a co-investor who bought years ago that the seller lost track of. It takes a court action in order to sell a property with a missing owner, but if that person was “declared death in absentia” and presumed dead the heirs can sell the estate.  If the missing person later turns up, in some states their assets including property must be returned to them or restitution made, which could cloud the title to the property until everything is sorted out.

7. Discovery Of A Will During Probate

When someone dies intestate, or without a will, their estate still goes through the probate process but instead of an executor, an administer will be named. That person will receive Letters of Administration, allowing them to pay creditors and distribute assets to the heirs, and gives them the authority to sell any real estate owned by the deceased. The property is sold during probate, and if a will is discovered in the middle of this process it could affect the title and you could even lose out on the house altogether.

Fortunately, discovering a will after probate for a previous owner of the home won’t affect your current ownership of the property, although it might mean some additional paperwork or questions when you’re ready to sell.

8. No Access To The Property

A landlocked property without access to a public street will probably have a right-of-way easement attached to the title. This easement allows the property owner to use a road or path through someone else’s property. A property that is landlocked with no access is illegal in some states, drawing into question your ownership.

If an adjacent property has no access, you should check your ownership documents. There could be an easement attached which will limit how you use it and make it harder to sell in the future.

9. A Neighbor’s Foreclosure Took Away Right Of Way Access

Believe it or not, if your neighbor goes through foreclosure it could affect your property title! This could happen if there is no easement recorded and the notice of foreclosure doesn’t mention it and it’s not part of the legal description of the property. You’ll have to ask your neighbor for an easement in this case and negotiate a price. If they won’t agree to grant it, you have to go to court to get a right-of-way easement attached to your title.

10. Old Documents With Vague Covenants And Restrictions

Ambiguous restrictions and outdated covenants are subject to interpretation, which means that disputes can arise. If your neighbors or homeowner’s association has a different interpretation of the covenant and object to your actions, they could file a lawsuit or issue a fine for a violation. In some states like Texas, an HOA can even put a lien on your home and foreclose for a single unpaid fine. Liens will have to be cleared before any transfer can take place.

Old restrictions that are hard to understand could make your title unmarketable, and in order to get them removed you might need to go to court to have a judge invalidate them. This is a hassle and a headache, so make sure you obtain and read any deed restrictions and understand them before you commit to your property.

11. Notarization Was Forged

The home-buying process involves a lot of paperwork signing and many of those signatures must be notarized. Public notaries are trained to act as witnesses and validate the identity of the signer and the authenticity of the signature. They’ll sign and stamp the document with a special seal and record the transaction in their logbook. If the notarization was forged, or someone fraudulently impersonated a Notary Public, then the entire deal is called into question and the title may have never been legally transferred.

Even if you are sure the notary is bona fide, if their commission has expired or even if their stamp doesn’t conform to state law, the notarization could be declared invalid. Each state and jurisdiction has their own rules, for example, in Florida notaries must use a rubber stamp that includes their commission expiration date while in Washington DC, the notarization must be an embossed seal.

An invalid notarization could void the document, so protect yourself by paying attention to this small detail. You can make sure the notary public you are using has a valid commission in your state and it hasn’t expired and find out what kind of seal must be used by searching on your local Secretary of State website.

12. Previous Mortgage Is Discovered After Being Misfiled

Unpaid mortgages can encumber a title because the lender has a lien on the property until the loan is paid. However, sometimes even when the mortgage is paid off and the bank issues a “Notice of Release of Lien”, if that paper isn’t filed correctly at the county courthouse, your deed will show there is still a mortgage lien attached to the property.

This is a problem you’ll need to resolve before you can sell or transfer your property to anyone else. It’s often not discovered until there’s a title search done as part of selling the home, and it could delay your closing or cause the deal to fall through if you can’t clear it quickly.

13. Squatters

Squatting has become more common after the banking and foreclosure crisis of the last decade. Legally it’s called “adverse possession” and affects properties that the owner doesn’t occupy. If someone moves into an abandoned home and they live there for a few years, paying taxes and taking care of it, then they can actually end up owning that property.

Squatters can file a quiet title action and if they can show that the property owner hasn’t prevented them from living there and that they’ve paid the property taxes they could be granted the deed. If you own property that’s vacant, make sure you check on it and take action against any trespassers or you could lose the title.

Protect Your Property Title

There are lots of strange and unexpected ways you could be blindsided with title issues or legal problems with your deed. If you have an owner’s title insurance policy, usually purchased at the closing appointment, your title company should handle these issues for you if they’re covered. Otherwise you might be in for some time-consuming documentation and court proceedings to clear the title and make sure your property is legally yours.

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