How title problems hold up mortgage closings

Before a lender disburses funds, they must be able to place a valid lien on clear, marketable title. Title issues break that chain of assurance. The title company and lender will flag defects discovered in the title search and require curative steps or proof of protection (usually title insurance) before the closing can proceed. The result: delayed funding, additional paperwork, and sometimes renegotiated closing dates.

(For background on how title insurance interacts with closings, see Title Insurance and Mortgage Closings: A Beginner’s Guide.)

The most common title issues that delay closings

  • Liens (tax, contractor, homeowner association): Unpaid property taxes, mechanic’s or contractor liens, and HOA arrears attach to the property and must be paid or subordinated before closing. Federal tax liens can be particularly sticky because they follow strict IRS procedures (see IRS guidance on federal tax liens).

  • Judgments and court-ordered liens: A civil judgment against a prior owner may create a lien that survives the sale until cleared.

  • Missing or forged signatures, unsigned deeds: If earlier deeds or releases lack valid signatures or were forged, the chain of title breaks and title companies will refuse to insure until corrected.

  • Unknown heirs or probate issues: Properties sold without clear probate or with potential heirs not accounted for can produce competing ownership claims.

  • Easements, covenants, and restrictions: Easements or restrictive covenants that limit property use don’t always block a sale, but unexpected restrictions can lead lenders to request written clarifications or boundary insurance.

  • Clerical errors and omitted legal descriptions: A wrong lot number, wrong subdivision name, or truncated legal description in prior records can cloud title.

  • Tax-status problems and special assessments: Outstanding property taxes or municipal assessments are liens that must be resolved.

  • Bankruptcy or pending litigation affecting title: If the seller is in bankruptcy or litigation, the debtor’s rights and court orders must be reviewed and often cleared by the bankruptcy court.

Why lenders (and title companies) refuse to close on a defective title

Lenders need to protect the security interest that the mortgage provides. A lender’s title policy or underwriting manual typically requires a condition known as “marketable” or “insurable” title. If any defect could allow another party to challenge ownership or the lender’s lien, the underwriter will withhold approval. That triggers curative steps (payoffs, affidavits, curative deeds) and can push back the closing date until the title is cleared.

Authoritative resources such as the Consumer Financial Protection Bureau and the American Land Title Association (ALTA) explain why title insurance and curative work are standard practice for reducing lender risk (Consumer Financial Protection Bureau, ALTA).

Typical timelines: how long will a title problem delay closing?

  • Minor issues (missing payoff statements, HOA dues): 2–10 business days if parties respond quickly.
  • Moderate issues (clearing a contractor lien, obtaining a missing signature): 1–4 weeks, depending on creditor responsiveness and whether funds must be negotiated.
  • Complex issues (probate, ownership disputes, forged instruments): several weeks to multiple months; contested ownership or litigation can take significantly longer.

In my practice, routine curatives average under two weeks when sellers and creditors cooperate; contested heir or forged-document cases commonly take 6–8 weeks or longer.

Real-world examples (illustrative)

  • Example 1 — Contractor lien: A buyer scheduled to close discovered a company lien for unpaid work performed three years earlier. The seller negotiated a reduced settlement with the contractor and produced a release; the closing was delayed by nine days.

  • Example 2 — Unknown heir: A property sold by a long-time owner later revealed a claim by a previously unknown heir. The buyer’s closing was postponed while the seller opened probate and obtained a court order; the delay extended beyond six weeks.

  • Example 3 — Forged deed: A chain break was discovered when an old deed had a forged signature. Title underwriters refused to insure until the seller obtained a corrective deed and, in some cases, a quiet-title suit. This delayed closing for months and required legal fees.

Practical steps to prevent or minimize delays

  1. Order the title search early: Start the title search as soon as the purchase contract is signed. Early discovery gives you time to cure problems before the scheduled closing.

  2. Include seller representations and timely closing clauses: Clauses that require the seller to resolve liens or to provide payoff statements by a certain date create contractual pressure to clear defects.

  3. Secure title insurance: Lender’s title insurance is normally required by mortgage lenders; buyer’s owner’s title insurance protects purchasers. See our in-depth guide: Title Insurance and Mortgage Closings: A Beginner’s Guide.

  4. Require payoff statements and releases before closing: Confirm payoff figures for mortgages, liens, and assessments and get written releases from creditors.

  5. Use escrow holdbacks selectively: When a minor issue can be resolved after funding, lenders sometimes allow an escrow holdback for a limited period with funds reserved to clear a specific defect.

  6. Work with an experienced title company and real estate attorney: Title professionals and attorneys can often negotiate practical fixes faster than lay parties.

  7. Check public records for unpaid taxes and judgments: A quick county recorder and clerk of court check can reveal tax liens or judgments early in the process.

What to expect if a title problem surfaces late in the process

  • Communication: You’ll receive a curative list from the title company or lender outlining required items.
  • Options: Typical options include paying the creditor from seller proceeds, negotiating a settlement, getting a subordination, or postponing closing while the issue is cleared.
  • Costs: Expect extra charges — legal fees, lien payoff amounts, title company curative fees, and possible extension fees from lenders.
  • Contingency preservation: If you’re the buyer, preserve contractual rights (e.g., inspection/title contingencies) to terminate or renegotiate if the seller won’t cure major defects.

Costs and financial impact

  • Title cure costs vary: small administrative fixes cost little; negotiated lien settlements can be thousands. Quiet-title litigation or bankruptcy-related curative work may exceed $10,000 or more depending on complexity and attorney rates.
  • Closing-date changes can add holding costs: Sellers and buyers may incur additional mortgage interest, storage, moving, or temporary housing costs when closings are delayed.

A short practical checklist for agents, buyers, and lenders

  • Order title search immediately after contract signing
  • Request seller payoff statements and HOA balances within 5 business days
  • Confirm buyer’s lender will accept escrow holdbacks if needed
  • Obtain owner’s and lender’s title insurance commitments early
  • Review public records for judgments, tax liens, or bankruptcy filings
  • If a defect appears, get written releases or affidavits and document all communications

When title insurance helps — and when it doesn’t

Title insurance covers many concealed defects that surface after purchase (for specifics, see our coverage primer on Title Insurance). However, title insurance typically excludes known and recorded exceptions listed in the policy and certain government-created restrictions. It also does not eliminate the need to cure recorded liens or satisfy judgments before closing; rather, it provides financial protection against covered losses after the purchase.

Two internal resources to help you dig deeper

Common questions

  • How can I speed up a lien payoff? Obtain exact payoff figures in writing, get creditor contact information early, and offer a prompt negotiated settlement or payoff from seller proceeds at closing.
  • Can a lender fund if title issues exist? Lenders sometimes fund with specific escrow holdbacks for narrow, resolvable items, but they will not fund if the title defect endangers the lender’s lien.
  • Is title insurance required? Lenders require lender’s title insurance; owner’s policies are optional but strongly recommended. The CFPB and ALTA provide consumer guides on title insurance and buyer protections (Consumer Financial Protection Bureau, American Land Title Association).

Professional disclaimer

This content is educational and not a substitute for legal or tax advice. Specific title problems can be complex and state laws vary. Consult your title company, real estate attorney, or lender for advice tailored to your transaction.

Selected authoritative sources