Buying or selling property can be an exciting milestone, but it also comes with legal details that can complicate the process. One of the lesser-known issues that can affect a smooth closing is a child support judgment. For both buyers and sellers, understanding how child support liens impact title insurance is critical to avoiding delays or even a failed transaction.
What is a Child Support Judgment?
A child support judgment is a legal claim placed against an individual who has unpaid child support obligations. When someone who owes child support tries to sell or refinance property, the judgment can appear as a lien on the title. This means the property can’t be transferred until the debt is satisfied.
In real estate, this is more than just a financial matter, it directly impacts title insurance and the buyer’s ability to receive a “clear title.”
How Does It Affect Title Insurance?
Title insurance protects buyers and lenders from hidden claims or legal issues tied to a property. If a child support judgment exists, the title isn’t clear until the lien is resolved. Here’s how it plays out:
1. Cloud on Title
A child support judgment creates a “cloud on title,” which prevents the seller from transferring ownership free and clear.
2. Delay in Closing
Title companies will not issue a policy until the judgment is either paid in full or legally released. This can stall the entire closing process.
3. Risk to Buyer and Lender
If the lien isn’t discovered and cleared, the buyer could inherit the problem, and the lender’s investment would be at risk. Title insurance ensures that doesn’t happen.
4. Extra Costs
Resolving a child support judgment usually requires payment of the owed amount, interest, and sometimes penalties before closing can proceed.
5. Seller’s Responsibility
If you’re a seller, it’s your responsibility to clear any child support liens before selling your property. Proactively disclosing and resolving the judgment avoids last-minute surprises and keeps the deal on track.
6. Buyer’s Protection
For buyers, title insurance acts as a safety net. If a child support lien is discovered before closing, the title company ensures it is resolved. If somehow it slips through, the insurance policy covers potential legal and financial damages.
7. Why Title Searches Matter
At AcerSearch, we specialize in identifying potential red flags—like child support judgments—early in the process. A thorough title search ensures no surprises pop up at closing, giving both buyers and sellers peace of mind.
Child support judgments can create major roadblocks in real estate transactions. They must be resolved before title insurance is issued. By working with experienced title search providers like AcerSearch, you can avoid costly delays and ensure a smooth, stress-free closing.