Provided by Mossy Oak Properties
If you're in the market to sell your land, you'll need to first consider the state of your title. The title is the binding document that states your property rights, and in some cases, there may be several actors who have ownership of a portion of your land. Without knowing the exact rights included in your title, you may not be able to transfer your land. That's why it's important to understand what makes a title "clean" or "dirty."
A clean title, sometimes also referred to as a clear or good title, means there are no outstanding disputes with who technically has ownership of your land. A clean title proves that you are the sole owner of your land and no other outside party can make any legal claims against you in regards to ownership.
On the other hand, a dirty title means there is a cloud of uncertainty or discredit hanging over the ownership of your land. Beth McLellan, broker and owner of Mossy Oak Properties Recreational & Timber Land Sales, LLC in Kosciusko, Mississippi stated a dirty title essentially refers to an issue with your ownership rights that needs to be fixed.
"It means there is a problem, such as a lien against the property, an heir that never signed off, the property was bought at a tax sale and a confirmation suit was never complete, etc.," McLellan said.
Additionally, if there are levies from creditors, municipal property or building violations or false surveys of your land, then a cloud may exist on your title.
How a title affects transactions
Simply put, without a clean title, there will be no land transactions. Even if a prospective buyer was interested, once he or she found out about the dirty title, they would likely turn away because it's not worth the risk to deal with ownership disputes.
To make matters more complicated, title insurance companies will refuse to work with you because they cannot guarantee you are the sole owner of the land.
"It is almost impossible to sell without a clear title," said McLellan. "[The title] affects the value and you cannot get title insurance."
Without title insurance, buyers and lenders alike may be naturally hesitant of your claim to the property, which will effectively lower the market value of the land. And if your land is viewed as less valuable, then selling wouldn't be a beneficial or profitable option anyway.
For buyers who are still looking to purchase land even though there has been a history of clouds on the title, they will need to ensure they are taking every precaution to protect themselves.
"[Buyers] need to be sure they never buy a piece of property without a reputable attorney doing a title search," McLellan suggested.
John Parsons of Mossy Oak Properties of Wyoming 307 Real Estate in Cody, Wyoming noted land will not only be less valuable if there is a cloud on the title, but it will also cause skepticism among others in the market.
"This makes the purchase of land in today's world fairly risky," said Parsons. "Having a cloud on a title makes a property hard to sell and definitely hurts value. Many times the problem can be resolved and title insurance issued."
Prospective buyers will likely find that land agents will not sell property without title insurance.
Likewise, buyers should refrain from signing an agreement until the title is completely cleared. Not only does this keep a buyer from walking into a legal nightmare, but it also gives them a better shot of securing title insurance of their own once they've taken over ownership of the land.
Keeping a title clean
The first step to having a clean title is to never buy land that hasn't been thoroughly researched by attorneys and land agents. An attorney can produce a title report, which is a summation or history of the title. This report can date back hundreds of years and provide a comprehensive fact sheet on the precise condition of the title so that you know the title is clean.
During the research process, an attorney may discover that there are tax or contractor liens, unpaid taxes, affidavits or boundary disputes pertaining to the land in question. If you are not aware of these issues and you are sold the property in ill faith, then you would be responsible for paying off all of these existing debts.
Similarly, as a landowner, you may find out that there is a cloud on your title that wasn't discovered for decades. To clear up this problem, you would have to settle the dispute financially or prove your case in court. To prevent either of these outcomes, you can conduct a title search and purchase title insurance.
Title insurance solidifies your claim as the sole owner of the property and protects you from future legal disputes. The insurance company inherently provides a line of legal defense against clouds appearing on your title without your knowledge, and can make you a more responsible landowner.
Title insurances ensures your title is clean moving forward, which allows you to put your land on the market and get a higher return on your investment if you transfer the property to another owner.
To guide you through this process, contact a land specialist from Mossy Oak Properties. An MOP broker can help you clear up your dirty title and make each land transaction easier and legally rightful to conduct.