From the decades-long violence between the Hatfields and McCoys to the brutal family soap opera of The War of the Roses to the daytime drama of Judge Judy, feuds between families, friends, and neighbors capture our attention. Human drama is difficult to escape and sometimes ignore. Fortunately, if there is a dispute over who owns your house, quiet title is a way to resolve the issue without resorting to fisticuffs. Although, it does require a judge -- just not a celebrity judge.
Here are some reasons why someone may need to quiet a title, and how settlement agents may be able to avoid it all together…
What is Quiet Title?
Quiet title action is a legal proceeding to determine who has claim to ownership rights on a piece of real property. The lawsuit is meant to give every party with a potential claim to the property an opportunity to present their evidence of ownership. If no one contests your suit, the judge grants absolute ownership rights to you.
There are three main reasons why quiet title may be needed:
- There is a break in the chain of title or some other defect on the title that can’t be resolved through title curative work.
- A real estate investor or homebuyer purchases a property at a tax deed sale, HOA or foreclosure auction.
- There is a dispute over property ownership either because the transfer of title was done improperly or fraudulently, there are competing claims from lien holders, there is a boundary dispute or an error in the legal description.
Why would someone need to do quiet title?
Settlement Agents may need to file quiet title in order to issue title insurance
A title search is always conducted on a property on behalf of a lender to ensure there are no breaks in the chain of title and the current owner has the right to sell. There are specific rules as to how this information is recorded in the land records. Even if ownership is obvious and other evidence supports this, if there is a missing required document in the public record, it's a technical break and threatens the current homeowner's rights. If there is any doubt or confusion regarding ownership, title companies will not issue a title policy. Because most buyers secure a loan from a lender, this affects an owner’s ability to sell.
These issues are considered to be defects or clouds on the title, or in the case of a deed obtained through court proceedings, a potential cloud should an error in the proceedings be found.
Agents will first try to “cure the title” by contacting parties involved with previous closings and proceedings to get the proper documents officially recorded. In some cases, they may issue policies that will list exceptions for the problem, meaning that it won’t cover that problem.
Sometimes, quieting the title is the only solution when all means to cure a defect are exhausted. Before a title insurance policy can be issued on behalf of a new owner without an exception, these issues must be resolved by the settlement agent. Title curative services are performed by the title company or real estate law firm involved in the latest transaction or sometimes performed by a third-party title support partner like PropLogix.
This can be difficult work, especially when lenders and banks have gone out of business or been acquired by another financial entity. Recently, we had a client who was having trouble obtaining a mortgage assignment and a mortgage satisfaction that was missing from a property’s chain of title. This kind of needle in a haystack scenario isn’t so uncommon given that most homebuyers stay put for 13 years before selling, and there is no financial incentive for lenders to hasten their recording of a mortgage satisfaction or other instruments that can cloud the title.
If a settlement agent isn’t using a payoff tracking service or following up with the lender and county clerk to ensure all documents are properly recorded after closing, this may lead to major title curative work for them or another agent at some point in the future.
Real Estate Investors also need to do quiet title after a tax deed sale
If you’re a real estate investor buying a property via a tax deed sale, this action is important to make sure you can sell without any issues. Since most buyers will be securing a loan for their home purchase, the lender will require a title insurance policy to be issued to protect their interest in the property.
A title agent or attorney will require quiet title action before issuing title insurance to a new buyer to ensure there are no future claims to ownership. Quiet title makes the title to the investment marketable. Taking the time to clean up the title before finding a buyer will make a real estate deal go more smoothly.
However, if there was an error in the court proceeding for quieting title, this may threaten your property rights and ability to sell. You will want to hire a reputable lawyer familiar with your state’s laws and requirements in order to avoid this.
Settling an ownership dispute
Quiet title lawsuits are usually enacted to cure non-adversarial title defects, but they are also used to settle ownership disputes. When two parties claim ownership of the same or part of a land parcel, this court proceeding is the appropriate action to settle the dispute. All potential parties with a claim and lien holders are notified of the proceeding and must present their evidence to support their claim.
How much does quiet title action cost?
If a title company can’t cure the title defect, quiet title is the last resort. This requires the help of a real estate attorney and costs anywhere from $1,500 to $4,000 depending on certain situations and the region and can take anywhere from two to six months. Obviously, there’s a lot of motivation on the part of a title agent trying to close a deal on time and without having to resort to such a costly process.
PropLogix can help with defective titles & prevent quiet title
Sometimes, quiet title may not be needed. Instead, some persistence and creative problem solving may be all that’s required to find the right person to sign a title curative instrument.
When a title company or real estate law firm is struggling to cure a title and wants to avoid quieting the title, they often turn to third-party companies dedicated to resolving this issues in a timely manner. While many companies make big promises, not all deliver. If your title company is struggling to get some hard cases solved, we’re here to help. Rather than toot our own horn, we wanted to share a review from a recent convert.
“I want to send a HUGE thank you for a REALLY FAST curative turnaround. We did a closing 10 years ago. We shred paperwork after seven years (the VA Bar requires we keep it five). A different company is doing a closing on the property now and found an unreleased 2nd DT that put a hold on the closing. With other companies, it can literally take 4 to 10 weeks to get a release. You guys turned it around in 48 hours.
I have to be honest. My staff was very reluctant to switch from our previous vendor. One employee came in my office yesterday and admitted the same, but said she was so glad we did, and the change was totally worth it.
You guys are the best.”
- Patrick Moore, Closing Attorney