When selling real estate, most buyers and sellers in my locale of Northern California hire an escrow company to handle the escrow and also provide title insurance on the transaction. In other areas, the escrow and title companies could be separate, and an attorney could also handle an escrow.
Title companies are third-party to a transaction and facilitate the parties involved via the purchase agreement and escrow instructions. Escrow and title companies have considerable oversight and state and federal laws to follow and often will run into an obstacle that could delay the transaction. For example, I am currently working on a transaction that has an obstacle on the title.
My client, the seller, sold a property years ago to a group of investors. As part of the deal, he gave the investors a first-right-of-refusal to purchase his adjacent land if he ever decided to sell. Today, we are close to closing escrow on the land with a different buyer and now have several individuals, the group of investors, on the title called grantees who retained the first right to purchase the property.
Having a recorded first-right-of-refusal creates a title obstacle which needs to be cleared up so the title company can close escrow and provide title insurance. Without the required documentation showing the grantees do not intend to purchase the land, we cannot close escrow.
The title officer and attorneys are tackling this obstacle, but being that the grantees are not interested in purchasing the land they had relinquished their first-right-of-refusal. Now it is just a matter of having the proper documentation showing this so we can close escrow.
Several common title obstacles could potentially delay a closing until the proper documentation is secured. Every transaction is unique, so it is good we have qualified and detail-oriented escrow officers to review a transaction for any additional documentation that may be required.
Here are several title obstacles that could potentially delay closing an escrow:
Bankruptcies, probates, and foreclosures – all can complicate a transaction and require additional documentation
Establishing the fact of death in a joint tenancy – this is the right of survivorship
Use of proper execution of a power of attorney
Family or business trust – there are several types such as: revocable, irrevocable, charitable
Recent construction – potential mechanics’ liens or subdivision map issues may exist
Discoveries during physical inspections such as encroachments or off-record easements
Clearing liens or judgments – there could be blanket liens or property specific
Clearing child or spousal support liens
Proper execution of documents – there could be errors, illegal deeds or even forgeries
Proper jurats – when a signer appears in person and affirms their identity under oath
Proper notary seals
Transfer of loans involving corporations or partnerships
Last minute changes to the purchase agreement by the buyer or seller
Last minute changes in title insurance coverage
Several obstacles exist that could complicate and delay a transaction. It is good to let your broker and escrow officer know of any of these potential obstacles at the beginning of an escrow.
Burt M. Polson, CCIM, is an active commercial real estate broker. Reach him at 707-254-8000, or [email protected] Sign up for his email newsletter at BurtPolson.com.