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What Are Title Exceptions?

Monday, September 19, 2022

The last couple of years were very good for real estate owners with over 6 million existing homes selling at often record prices. Anyone who owned their home for more than a few years before selling walked away with a tidy profit.

Of course, buying a home is a complicated, multi-step process. One of the crucial steps is the property title search. These ensure that the sale won't create problems for the buyer later.

Without a reasonably clear title, most mortgage companies won't approve the loan.

That isn't to say that you won't see title exceptions. Not sure what a title exception is or how they affect real estate purchases? Keep reading for a quick overview.

What Are Title Exceptions?

When you have a title to a property, it essentially means that you have specific legal rights to the property, such as access or the right to build on the property. Ideally, when you buy a home, you get a clear title.

A clear title means that there are no specific limitations on your rights in regard to the property. Exceptions occur when a third party has some claim on the property.

Non-Problematic Exceptions

There are a number of non-problematic exceptions that you find on property titles that won't hinder a sale. One common exception is an easement. Easements let some other party use or access your property in some specific way.

For example, a utility company might get an easement to put up a utility pole on your property. If you built a second home on your property and sell it to your aging parents, they would get an easement to, for example, use the driveway.

Other non-problematic exceptions include water rights, mineral rights, and certain types of liens. If the current owner has a mortgage, the mortgage provider will have a lien that gets paid at the time of sale.

Problematic Exceptions

You can also see problematic exceptions attached to a title. Some common examples include:

  • Ongoing ownership disputes
  • Boundary disputes
  • Tax liens

Things like ongoing ownership or boundary disputes are problems a buyer doesn't want to inherit. Most mortgage companies insist that things like outstanding tax liens be resolved prior to the sale.

Protecting Yourself

Title searches are a good first step in protecting yourself and your investment, but they aren't foolproof. Many buyers will also invest in a title insurance policy to cover them if a title problem crops up after the sale.

Title Exceptions and You

The good news for most property buyers is that most title exceptions won't interfere with a sale. The catch is that you must accept those exceptions, such as easements with the utility company or the mineral use carve out.

If you're worried about problems down the road, you can protect yourself with title insurance. Most title insurance companies offer several versions with increasingly comprehensive coverage for potential problems.

Heartland Abstract specializes in title insurance policies and additional services for buyers and sellers. For more information about our services or policies, contact Heartland Abstract today.

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