Understanding Breach of Warranty in Real Estate
A breach of warranty occurs when a seller is unable to provide a clear title to a buyer. In real estate transactions, sellers are essentially guaranteeing that they hold a clear title to the property they are listing. This forms a foundational assurance upon which buyers base their offers.
The Role of Title Search§
When a buyer makes an offer on a property, they do so believing that the seller has the clear title, as guaranteed. This assumption is typically verified through a title search, which investigates the history of ownership and any potential encumbrances tied to the property.
Consequences of a Breach§
If a title company uncovers issues that contradict the seller’s guarantee of a clear title, it constitutes a breach of warranty. Once aware, a buyer has the right to withdraw from the transaction. However, a breach does not always result in a halted sale. Sellers have the opportunity to resolve the title issues; and if they successfully clear the titles, the buyer may proceed with the purchase.
Navigating Title Resolutions§
In situations where a breach of warranty is discovered but both parties remain interested in closing the deal, steps can be taken to rectify the issue. Sellers may need to carry out specific actions—such as paying off outstanding liens—before the property can be successfully sold.
Understanding these aspects empowers buyers to make informed decisions and safeguards their investments in real estate transactions.
Related Terms: Title Insurance, Disclosure, Contingency Clause, Escrow, Property Deed.
