A title warranty is automatic in most property sale transactions, but if the seller is acting as an agent, no title warranty may exist.
This case may occur in a situation where the auction is taking place for example, in a real estate sale.
In such cases, the seller of the property is not the owner, so he may not be aware of another party’s rights on the property.
A title warranty can give the buyer of the property legal rights to sue the seller if there are any claims or problems with the title of the property.
For example, an heir of a previous owner may have an outstanding claim on the property that is not reported by the seller.
The buyer can take legal action to recover the money he invested in the property purchase and the damages caused to rectify the issue.
Other risks of completing a transaction may include ongoing disputes over the scope of defining the property boundaries.
Adjacent property owners may say that the property line is different from what the seller presented to the buyer. Bills for unpaid invoices and taxes may exist, making the transaction difficult.
If the property in question doesn’t have any outstanding liens and the ownership of the property is established successfully, the property will receive a clear title, and the seller can then provide a warranty of title to the buyer without any impediment.