Title Tip: What Real Estate is Actually Unsellable?

This tip is not about ugly houses that some folks consider unsellable. Those homes might be undesirable, but not technically unsellable. Let’s talk about issues that could make a property legitimately unsellable – meaning you cannot legally transfer the title or get title insurance. These problems have nothing to do with aesthetics.

If someone, who is not the legal owner, takes money for a property and signs a deed, the real estate transaction is invalid. I could sign a deed claiming to sell you the Brooklyn Bridge, but that doesn’t mean it would be a legal transaction. Or if I actually owned the Brooklyn Bridge with a partner and I sold it to you unbeknownst to them, you would have a legal mess on your hands. 

Current Owner Died

When a homeowner has died, they obviously cannot sell their home. Signing a deed from the grave is impossible. When a homeowner dies, their interest in a property is no longer owned by them as an individual, but by their estate. It must be determined who controls and has the legal right to sell the property. That can be a long and complicated process. Especially if heirs are in disagreement.

If the owner died with a will, the heirs can take immediate action. The will can be probated with the county court within four years of death. A last will and testament does not automatically cause the real estate to transfer. It is just a statement of the deceased’s intent. The property must legally transfer to another person(s) or entity to be sold.

An Affidavit of Heirship might be used if the deceased died without a will or the will was not probated. This document must be completed in detail and approved by the title company. Once the heir(s) are established, the process of filing the affidavit, transferring the deed, and recording in county records may happen so that the property can be sold or transferred.

The question of who has rights to the property and in what percentages must be solved. Until ownership is established, and all relevant parties are in agreement, the property is essentially unsellable.

Missing Heirs or Exes

Everyone with an ownership interest in a property is required to sign documents to sell it. Surprisingly, sometimes those folks are hard, if not impossible, to find. No title company wants to take the risk that an estranged heir, an ex-spouse, or other person that has an ownership interest may come forward and contest the sale. That person may declare that the property was sold without their consent and they could have a legal claim.

This can get especially tricky when the owner dies and there is no probated will to determine who gets what. For example, a spouse may own half of the property while the deceased person’s four grown children own the other half. One of those heirs could also be deceased, in which case their children would own their ¼ of the ½ of the property. As I said, it gets tricky.

If you think divorce can get ugly, just try to get a bitter ex-spouse to sign documents to sell a property.

Parties in Possession

A person occupying a property may have a right to physical possession. A tenant, spouse or other interested party may not be willing or legally required to vacate for a new owner. Even a person occupying the property without a legal right – like a squatter – could maintain a right to occupy the property that the buyer or seller has no notification.

One more common example is the surviving spouse’s right to continue occupying their homestead property. Under most circumstances, a buyer cannot remove a previous owner’s surviving spouse from their homestead. Not many buyers want to purchase a property that someone else has legal possession of for an indefinite period of time with no obligation to pay them.

Home Insurance Issues

An uninsurable home is one that is not eligible for property insurance because it is unlivable or in need of extensive repairs. Without insurance coverage, a mortgage company will not lend funds to purchase a home. A property may be rejected for insurance coverage due to roof issues, foundation problems, fire, storms, etc.  This type of issue could be remedied to make the property insurable or a buy could pay cash and buy it without insurance coverage.

Lack of access

Sometimes a piece of property is sold off in pieces. One parcel may be left with no road access or right of way to access the land. For the property to sell, the buyer and their lender would need to acknowledge and accept that there is no public right-of-way to the property. Unless written easements are granted and approved, most potential buyers are not able to get a loan to purchase.

A title company can refuse to close on a sale or issue title insurance for many reasons. Without title insurance, mortgage lenders will not issue a loan for purchase. In addition, a buyer would not have any assurances that the transaction is legal or valid. When confronted with one of these situations, it is important to consult a real estate attorney.

The opinions expressed are of the individual author for informational purposes only and not for legal advice.