What Stops a House from Being Sold

When the housing market is healthy and there is an abundance of buyers that can get into bidding wars over a property, one of the most asked questions of real estate attorneys is, “What stops a house from being sold?” For many buyers, there is nothing more frustrating than being locked in on a desired property when suddenly something hits the brakes.

The best way to minimize the chances of finding yourself in this situation is by understanding what stops a house from being sold so that you know what to look for and how to avoid this situation.

Buying and Selling Houses and the Role Title Companies Play

When a person wants to buy or sell a house, there is a process. Many buyers and sellers opt to work with a realtor, but some might be surprised to find it is not always necessary.

A buyer can work with the seller to negotiate a price, give some earnest money, and sign a contract saying they agree to buy the property. This is sometimes called an earnest money contract, which should then be deposited to a reputable title company.

From here, a title company is tasked with running a title search and preparing a formal report for the involved parties to review. The top 3 things a title company typically looks for and determines include:

1. Is the person selling the property the sole owner of the property? If not, do they share a title with someone? If so, is the other person a spouse, ex-spouse, or a family member? Which parties are required to sign the paperwork for a legal and valid conveyance?
2. How did the person selling the property get the property? In other words, did they buy it? Did they inherit it? Did they receive it as a gift?
3. Are there any liens, encumbrances, or abstracts of judgements on the property in question?

Once the title company has the answers to the above questions, that information is then turned over to the buyer for a detailed review.

Now to answer the question, what do the above answers have to do with what stops a house from being sold?

• If the seller contracting with the buyer represents that they are the sole owner when there is actually more than one owner, this can stop a house from being sold. For one person to sell the property they must have 100 percent ownership. If there is shared ownership of the property, all owners must sign off on the agreement.
• Mineral Rights. The property contract should be extremely clear on whether the rights to the property include mineral rights or merely surface rights. Vague language and gray areas regarding mineral rights may be enough to stop a house from being sold.
• It is necessary to know if there are any types of easements or leases against the property. If this is not made clear, it may be enough to halt the sale of the house before it can be lawfully completed.
• If there are any mortgages, IRS liens for unpaid taxes, or property tax liens, they must be properly disclosed to the seller through official channels. Failure to do so can halt the sale of a house.

How a Real Estate Attorney Can Help with the Title Report Results

Getting the completed title report back is only part of the process. Hiring a seasoned and qualified real estate attorney to help sort through the title report results is the other.

For example, if a title report comes back with issues that need to be addressed, a real estate lawyer can assist with either correcting the issues or working with the relevant parties to get it resolved. Some of the most common issues attorneys deal with in title reports are ownership issues, in which case they can help with:

• Determining if there needs to be another signatory and who that is.
• Identifying if there is a problem in getting the necessary signature, determining what the problem is, and negotiating or offering something to get it. Negotiation may not be necessary if there is an issue of laches, statue of limitations, trespass to try title, etc., but each requires a real estate attorney’s legal experience.
• Dealing with IRS tax liens. If there is a judgement or lien against a property for sale, the seller and title company must get approval from the Internal Revenue Service before finalizing the deal. The IRS will require property appraisals to know if the price is of fair market value. Once approved, the IRS will need to “release the property” to be sold. The result of this could be that all the proceeds of the sale go directly to the IRS to pay off the lien. Sellers that know this is likely to happen may want to back out of the sale. However, this is where an attorney for the buyer would help enforce the earnest money contract and sale, regardless where the proceeds end up going.
• Enforcing earnest money contracts. If the buyer identifies a lien, easement, or some other kind of title issue and gets cold feet, they may want to back out. Again, a real estate attorney can help address the issue by enforcing the contract, working to get the title issues resolved, and pushing the sale through.

When it comes to what stops a house from being sold, most of the issues can deal with problematic results in a title report. To protect yourself, as the buyer or seller, reach out to a professional real estate attorney today.