What's Lurking in Your Title Could Cost You the Sale

A hidden danger might be lurking in any real estate deal, one that most buyers and sellers never think about until it’s threatening to blow up their closing: title issues.

I’ve had two deals this year that run straight into them, and they’re a good lesson in how these problems surface and, more importantly, how to keep them from happening to you.

1. A $2 million lien on a $1 million house. This one was strange, but it worked out. We had an accepted offer, signed, and moved into the purchase and sale contract, which is how we do it in Massachusetts. When the attorneys dug into the title, they found a tax lien worth more than the house itself, about $2 million on a home worth around $1 million.

Here’s what happened: a family member owed a big tax debt to the IRS but never had an ownership stake in the property. The parents willed the house to the next of kin, not to that particular kid, but because the kid shared a name with the dad, the IRS assumed they were the same person and slapped the lien on the house.

Normally, a lien doesn’t delay a closing; it just gets settled from the proceeds. But no seller is going to hand every dime of their sale to the IRS for a debt they don’t owe. So it delayed things while the seller got the lien removed, which took about two to four weeks. Not a big deal.

2. One house that was secretly two properties. The second deal is still open, and it’s a much bigger headache. Both of these, by the way, trace back to a common source of trouble: estate sales, where an owner passed away and the home transferred to the next of kin, who then sells it. You’ll spot these in listings with a line like “seller has never lived in the house.” When you see that, check whether the home still needs to clear probate court or already has a license to sell. Here, the parents owned the property, passed away, and it went to the next of kin, who later decided to sell. Then we discovered the “house” was actually two separate plots.

Normally, that’s one piece of land, one title, one deed. This was two, and while one plot had transferred correctly, the other never did. The parents owned both, so nobody else held a plot, but the seller still had to go back to probate court to fix it. We still haven’t closed. It’s pushed things back by months, with the sellers facing roughly $10,000 in legal fees. We’re just lucky our buyers could stay put while it gets resolved. If they couldn’t, this deal likely would have died. A giant mess.

For sellers, you can also avoid all of this.

My recommendation: before you list, have a title search done on the property. Our preferred closing attorney offers exactly this, a pre-listing title search, and I recommend it to my sellers. It doesn’t benefit you to list the home, find a buyer, then discover a title problem, lose that buyer, pull the listing, and start over months later. You’re far better off catching those issues ahead of time, getting them sorted, and then going to market for the clean, smooth sale you actually want.

If you’d like to talk through what any of this means for you, buy side or sell side, or get in touch with our preferred closing attorney, I’m happy to make that happen. Reach me at (857) 210-9925 or lou@c21revolution.com, or visit lousellscambridge.com.