Red Flags in Title and Escrow

A 'red flag' in title and escrow is a signal to pay attention. These are items on a preliminary title report that may cause delays or problems within a transaction and must be addressed well before closing. Common red flags include bankruptcies, business trusts, clearing liens and judgments (including child or spousal support liens), encroachments or off-record easements, establishing fact of death in joint tenancy, family trusts, foreclosures, powers of attorney, proper execution of documents, recent construction, transfers involving corporations or partnerships, and last-minute changes in buyers or title insurance coverage.

Taxes: Watch for postponed property taxes — a state program for senior citizens that allows tax deferral until the property is sold. A demand must be ordered from the state by escrow, and it may take up to two weeks. CC&Rs should always be provided to the buyer and read thoroughly, especially if improvements are contemplated. Encroachments (commonly fences or driveways) may require the buyer to take the property subject to the encroachment — contact your title officer immediately.

Trust Deeds: Watch for old trust deeds from a previous owner or from refinances. If you find a trust deed that has already been paid off, call your title officer immediately. They will research it and take steps to remove it — either by working with escrow to get release documents or by acquiring an indemnity from the title company that paid off the old loan. Old trust deeds with private-party beneficiaries (individual people acting as lender) are especially difficult to clear.

Notice of Violations are recorded by fire departments, health departments, or zoning enforcement when a property violates a local statute. The violation must be eliminated and the agency must issue a release before closing. Court Orders and Judgments — especially support judgments — can take up to six weeks to get a demand and release. Contact escrow immediately.

Bankruptcies require court permission to sell or encumber property. Chapter 7 and 13 bankruptcies against the seller are most common. A letter from the bankruptcy trustee will be required. A Notice of Pending Action (lis pendens) means someone has a lawsuit pending that may affect title — often found in divorce situations. A demand and withdrawal will be required.

The Statement of Information (also called a statement of facts or statement of identity) is critical — it allows the title company to eliminate items recorded against common names such as tax liens, judgments, welfare liens, and support liens. Fill it out completely and return it promptly to avoid delays.

Team Goeglein at Fidelity National Title proactively identifies every red flag on your preliminary title report and contacts you with a clear explanation and action plan. Matt Goeglein and Xavier de la Piedra IV have resolved thousands of title red flags across the South Bay — from old trust deeds to lis pendens to bankruptcy complications.