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Contingencies in real estate contracts are conditions that need to be met before the deal can be completed. Title contingencies help protect buyers, who need to know that the seller actually has the right to sell the property and is conveying a “clear title” to the property when they sell it.
Of all the contingencies in real estate contracts, title contingencies are perhaps the most critical. In general, they give buyers the right to approve a preliminary title report (typically provided by a title company) before the real estate contract becomes enforceable. Depending on the language in the title contingency clause, if a buyer has an objection to a “defect” in the title, the seller has the right prevent the buyer from backing out by “fixing” the defect.
Waiving The Title Contingency
If you’re financing a property through a traditional lender (e.g. a mortgage company or bank), you won’t be able to get financing if you waive the title contingency. Lenders won’t approve a loan if they believe the title for the property could be in question.
Even if you’re paying cash for a property, waiving the title contingency is still a bad idea. Without clear title to the property, you’re at risk for losing it (or losing some of the rights to it) and would have trouble selling it to someone else.
Title Contingency vs Title Insurance
A title contingency is a clause in a real estate contract, whereas title insurance is insurance against past defects in a chain of title for a property.
Title insurance is provided by title companies or title insurers. A title company that provides title insurance will search the public records to ensure that the seller has the right to sell the property and that there aren’t any claims on it. This type of insurance is an agreement that if a problem arises with the ownership records of the property, the title company will fix the defect, defend you against potential claims on the property, or compensate you for losses.
Title Insurance Exceptions
Most buyers don’t know this, but there can be many types of encumbrances on a property that aren’t covered by title insurance policies. Known as “title insurance exceptions,” these are rights that have been granted to another person or entity. They could be anything from a utility easement to a cellphone tower lease, a septic and sewer easement to a right of way agreement, a zoning restriction to a deed restriction. Any of these potential exceptions could impact your right to enjoy the property and/or sell it at a future date.
We’re Here For You – Experienced Real Estate Attorneys
As experienced real estate attorneys, we have the expertise to perform meticulous title research (including title insurance exceptions), and we can do it quickly and for a reasonable fee. Check out our most popular legal solutions for title research: TIER and TIER Plus.
See related topics:
Earnest Money – Real Estate Sales Contract
Inspection Contingency – Real Estate Sales Contract
Financing Contingency – Real Estate Sales Contract
Appraisal Contingency – Real Estate Contract
Property Sale Contingency – Real Estate Contract
At Timely Contract, we have local real estate attorneys who have experience throughout Idaho, including: Boise, Post Falls, Coeur d’Alene, Lewiston, Moscow, and Sandpoint.
We also have local real estate attorneys who have experience throughout Montana, including: Missoula, Billings, Bozeman, and Kalispell.