What happens if a seller cannot get a clear title?
In the United States, the contract for sale often includes a clause where the seller warrants the ability to produce good title. If the seller cannot provide this, the contract might be breached. In practice, with a bit of sensitive lawyering, the buyer often agrees to walk away with their earnest money deposit and find another property, avoiding litigation. However, in many cases, the prospective seller simply ignores the problem, which can lead to the property eventually becoming distressed and foreclosed due to non-payment of taxes or mortgage.
The Importance of a Clear Title in Car Transactions
When dealers purchase cars at an auction, one might hear the phrase “title attached,” which is often misleading. This phrase usually means that the title is not available and that there might be issues. Sellers might claim they are waiting for a duplicate or they forgot to bring it. However, the crucial fact is that the purchasing dealer should never sell a car without the title in hand. Sellers may lie, saying they have mailed it or taking the car on trade without paying off the loan, likely using the money to pay off a more pressing debt.
For example, we once bought a car at an auction with a claimed "title attached," only to discover weeks later that there was no title for months. When the buyer came to buy the car, we had to tell them that the title was missing, and the sale had to be canceled. In New York, you cannot register a car without a clear title or lien release; thus, this issue is a significant problem for the consumer.
Buyer Beware: Dealing with Title Issues in Private Party Sales
In private party sales, the buyer is often left without recourse if they fail to receive the title. Purchasers are essentially left with a worthless car if the title is missing, and getting their money back without resorting to violence is almost impossible. This process can be particularly problematic when dealing with pre-owned vehicles, as missing titles can arise from various issues, such as the seller being unable to produce the title due to a delayed financing process.
Personal Experience: A Failed Sale Due to Title Issues
One time, I sold a pre-owned Ram to a couple, a truck that had been traded in before the previous owner’s financing went through. Unfortunately, the previous owner provided fraudulent income information, leading to his loan being declined. As a result, we could not pay off the balance on the trade-in vehicle and had to return it to its original owner. We then had to inform the buyers about the situation, and they had to return the truck. To make things right, we sold them a comparable new truck at the same price as the pre-owned one they had given up.
Proactive Steps to Address Title Issues
To prevent such situations, it is crucial to take proactive steps when facing title issues. One approach is to engage a legal professional to address any discrepancies or issues that need to be resolved. This might involve working with creditors, lienholders, or other parties involved in the financing process. By doing so, you can often resolve title issues before they become a major problem, potentially avoiding the sale being canceled and reducing disputes with buyers.
Another proactive step is to have a clear and detailed agreement with the seller before purchasing a vehicle. This agreement should outline the consequences of title issues and how they will be resolved. This can help prevent misunderstandings and ensure that both parties are aware of their obligations.
Conclusion
Title issues can cause significant problems for buyers and sellers alike when purchasing real estate or automobiles. It is crucial to ensure that all necessary documentation, including clear title, is in place. By understanding the potential risks and taking proactive steps, you can minimize the likelihood of encountering title issues and protect yourself and your finances.