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Why probate-related real property sales can lead to title issues

On Behalf of | Mar 5, 2024 | Title Defects |

Title issues are a major concern for those who purchase real property. Whether they buy a home to use as a primary residence or as an investment, what they really pay for is the title to a property.

Occasionally, someone who acquires real property receives a letter from another party who claims to have an interest in that piece of real property. Title disputes can lead to expensive litigation that can take months to resolve. Sometimes, the courts may side with the party alleging that they have an interest in the property rather than the owner currently in possession of the property.

It is, therefore, crucial to perform a proper title search and to secure title insurance when investing in real estate. Proper research and title protection are especially important when buyers acquire property from someone’s estate.

Why do real estate transactions tied to probate proceedings often carry an increased risk of title issues?

A home can be a big part of someone’s legacy

For the average adult in the United States, the home where they live is their most valuable personal asset. They may have spent three decades or even more paying off the mortgage on the property. After they die, they want their most valuable holdings to pass on to their loved ones.

Estate plans often include very specific instructions for handling someone’s real property. Someone may instruct the personal representative of their estate to prepare the property for sale. However, they may also extend the right of first refusal to some of their beneficiaries. Those parties have to receive notice of the sale so that they have an opportunity to make a fair market value offer before it becomes available to members of the public who may wish to purchase it.

Other times, testators want family members to directly inherit the house rather than to purchase it or receive proceeds from its sale. The failure of the probate courts or the personal representative of the estate to locate and communicate with someone’s beneficiaries or heirs is one of the top causes of title issues in the United States.

Those hoping to acquire real property during a probate-related sale may need to do more investigation as part of the due diligence process than those buying directly from the prior owner of a property. At the end of the day, conducting a thorough title examination and identifying potential sources of risk may help people protect the money that they invest in the acquisition of real estate.