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What is a title cloud, and how does it affect your home purchase?

On Behalf of | Aug 16, 2022 | Uncategorized |

When you want to buy a home, you’re about to make a major financial decision. One of the things you have to do is make sure that the purchase is a smart one.

Before you buy a home, it’s wise to have a title search performed. This will look for clouds, which are liabilities that are connected to the deed or other issues. For example, a cloud might signify that there is a lien on the property because the homeowner didn’t pay taxes or because there is a question of ownership.

A cloud can be a real issue, and it may prevent you from making a purchase. If one comes up, you may want to talk with the seller about resolving the cloud and if they are able to get it removed before you buy the home. If not, you may want to look into buying a different property.

Common causes of clouds on titles

There are several common reasons that clouds might be present on a title. These may include:

  • Foreclosures
  • Liens
  • Fraud

In any of these cases, the consequences of having a cloud on a title is not only frustration but also, potentially, the failure of the sale. You may decide that you don’t want to risk problems with the clouded title, or you may need to renegotiate to make the purchase at a lower price point.

If you are trying to finance the property, then you should know that your mortgage lender may refuse to offer financing for a home that has a clouded title, too.

What if you find out about a cloud on a title later?

If you find out that there is a cloud on the title of a home you’ve already purchased, you may need to resolve the cloud yourself. In some cases, you may be able to hold others liable for failing to identify the cloud before your purchase. If you find yourself in that situation, it is valuable to learn more about the law and to determine if you have standing to unwind the home purchase or get the cloud resolved in another way.