Are you always confused about what different words in finance or real estate mean? Does this often leave you clueless and stressed out about getting yourself into situations that may have a list of conditions that you may not be able to meet? Well, you need not worry. This article has an insight into what bad titles are. If you have recently come across a legal document stating this and are curious to learn what it is all about, then you are in the right place. To find out all about bad titles and how they impact your choices, along with how they can be resolved, read ahead!
Bad Title – The Basics
In simple terms, a bad title can be referred to as a legal document that is associated with an asset. The entity that holds this title is, however, not granted ownership of the asset in question. Why is this so? Well, several reasons may aid in this such as financial issues, legal concerns, a clerical error, or even unsettled legalities. In most cases, an unpaid financial obligation may too be the reason for a bad title to come up.
These titles are also always associated with real estate property and can be the hurdle that prevents the titleholder from putting the property up for sale. A clear title on the other hand allows the titleholder to sell the property. Certain conditions, if fulfilled by the titleholder, can luckily remove the restriction of selling the property under the bad title. These conditions may be the resolution of the clerical errors or legal and financial concerns at play.
Digging Deeper Into Bad Titles
When investing in any asset such as homes, property, or vehicles, a title is drawn up. This is to prove one’s legal right and ownership over the tangible asset. The proof can also be for intangible property and assets. Trademarks are a common example of this that titleholders have.
Can The Title Holder Sell The Asset Under A Bad Title?
For any asset to be sold, the title for it needs to be clear. This makes it legal for the titleholder to dispose of the asset or property without any worry. If the title is not clear, then it is not free to be sold.
The titleholder cannot transfer the property or asset to another party under a bad title as well. Thus, making a bad title a defective title. They are also known as clouded titles or titles that a break. In most cases, the titleholder may not be aware of the bad titles and their conditions. Thus it is always a good idea to have this cleared out when holding any title over a tangible asset.
What Are The Reasons For A Bad Title To Ensue?
Bad titles arise due to many issues. Here are some of the most common reasons.
- Lien on property
- A building violation that may not have been corrected
- Back taxes
- Failure to pay off a loan or mortgage on the asset
- Delay or failure of having the property or asset registered
- Misspelled names and missing details in the title
If any of these problems arise, then it may be difficult for the titleholder to sell or transfer the property forward. the new owner of the titleholder may therefore have no legal claim over the asset. To legally transfer the property, it is important for the titleholder to have a clear or perfect title over the property or asset. To do so, the issues are required to be resolved. Only then can the new owner have a claim over the property and the bad title be eradicated.
One way to remove the bad title is by taking out title insurance. When this is carried out, the insurance company deals with the issues and concerns on its own to convert the bad title into a clear title. In this process, the property owner does not have much to do except wait till the issues have been resolved.
What To Keep In Mind
Bidding on a property is what most people engage in. After this, the mortgage process begins. As this happens, a title search is run by the mortgage company to look into whether the titleholder holds bad or clear titles. All previous records are pulled up for this. From tax payments, deeds, debt, incomplete information, or building code violations, all are looked into. If any of them come up in the search, then the property is declared as being illegal to sell and purchase.
Rectifying Bad Titles
The good news is that bad titles can be rectified. Payment of outstanding debt, corrections in clerical errors, satisfaction, and resolution of any liens among others, can remove the bad title. Title insurance is also another way of preventing any unforeseen claims in the future. This is what real estate agents look into first when dealing with the buying and selling of property.
Wrapping it Up!
So, there you have it, a breakdown of what a bad title is and how it can prevent a titleholder from selling or transferring an asset. To clear the bad title, having the issues resolved first is therefore important. If you are a holder of a bad title, then you know what to do next. Get in touch with a title insurance company to help you resolve the concerns.
In addition, you too may want to be careful when investing or purchasing a property from anyone going forward. Make sure their title is clear so that you receive the ownership of the property without facing any discrepancies and legalities in the future.