Have you heard your mortgage lender or real estate agent mention title searches and wondered what they were referring to?
Property searches are done on nearly every real estate transaction.
Understanding a title search is crucial when purchasing a house or other real estate.
Property title searches examine public records to confirm a property’s legal owner and verify whether there are any liens or claims that could impact a buyer’s ability to purchase.
Buying a home can be an exciting experience, but it also has the potential for a lot of stress.
While you might be eager to finish the buying process and move in, there are many required stages to complete to ensure everything is legal.
Many stages of closing on a home can potentially delay your closing date. You may be more frustrated if you don’t understand why these processes occur.
The title search is one of the parts of closing that can confuse home buyers and delay closing.
We have the answers if you’ve ever wondered what a title search is, what it involves, or if you need one. The primary goal is to ensure a title’s marketability. It protects both the buyer and the lender.
Let’s examine the importance of a property title search when buying a home.
The search for a title is a critical aspect of a real estate transaction for a good reason.
Facts and Figures Worth Knowing
1. A title search examines public records to determine a property’s history of ownership and any potential issues with its title.
2. It helps identify any liens, encumbrances, or legal claims that could affect the property’s ownership rights.
3. Professionals, such as real estate attorneys or title insurance companies, typically conduct title searches.
4. These searches ensure that the property bought or sold has a clear and marketable title.
5. During a title search, various documents, including deeds, mortgages, tax, and court records, may be reviewed to establish the property’s accurate ownership history.
6. They are conducted in 99% of real estate transactions to verify ownership and any potential liens or encumbrances on the property.
7. The searches typically take 7-10 business days to complete.
8. More than 90% of title searches reveal some issue or discrepancy that must be resolved before the property can be transferred.
9. Title insurance, often obtained after a title search, protects homeowners from financial losses due to undiscovered defects or legal claims on the property. It is purchased in most cases.
10. A thorough title search is estimated to reduce the risk of unexpected legal disputes by 85%.
What Are Property Title Searches?
The property title contains details of who legally owns the home. While these documents should give you all the information about liens on the property and who owns it, they might not be up to date.
The property title might also miss much of the history you’ll want to know when buying the home.
Using a title search company gives you a more thorough search of the records to find documents that would otherwise be hidden. Title searches will find the home’s legal owner and reveal anyone else with a claim on the property.
There could be liens on the property that must be resolved before closing. If the home has had any improvements, for example, the contractor could have put a lien on the title if they weren’t paid.
When a homeowner misses paying HOA fees or property taxes, it should be revealed in a title search. Sadly, if you were to buy the home without a title search, and there are liens on the house, they could become your responsibility.
If this were to happen, you could be left with a hefty bill to pay that could put you in financial difficulty. For this reason, a mortgage lender typically wants to make sure title searches are completed, and they also sometimes require title insurance in case something gets missed.
The Role of Public Records
Public records are the foundation of any title search. They offer significant information about a property’s past. These records, which include deeds, court judgments, tax liens, and easements, are meticulously reviewed to construct a property’s legal history.
The goal is to ensure that the seller has an explicit right to transfer ownership and that the buyer is aware of any claims or restrictions on the property.
By examining public records, title searchers can uncover any discrepancies or issues that must be resolved before the sale can proceed. This ensures a smooth and secure transfer of property ownership.
Identifying and resolving title defects is vital to prevent future legal disputes over property ownership.
What is a Chain of Title?
A chain of title is a property’s history of ownership transfers. Tracing the title chain is essential to ensure no breaks could affect ownership. When buying a specific piece of property, a title searcher is hired to trace the chain of title to ensure the seller has valid ownership.
Title companies or a real estate lawyer can conduct the chain of title work. Once the work is completed, legal ownership of the property will be established. The chain will run from the current owner back to the original owner.
A chain of title will be one part of the process, giving the prospective buyer and mortgage lender assurances that they have a legal right to sell the property.
What is the Abstract of The Title?
An abstract of the title is a version of a property’s history. It examines explicitly ownership changes, whether through a traditional sale, foreclosure, tax sale, inheritance, or personal gift.
The abstract of the title document will also include any potential legal problems such as encumbrances, encroachments, liens, easements, and unpaid property taxes. It can also be referred to as the title abstract.
A title abstractor plays a crucial role in the title search process by examining public records to provide an abstract of the title.
Who Does a Title Search?
A lender’s real estate attorney or title company will conduct a thorough property title search as part of the home-buying process.
The bank’s law firm could also refer the work to a specific title examiner.
A title report will be generated from conducting the title search.
The title report will contain crucial pertinent information about a property. It will include a complete legal description of the property and information on the current taxes, property value, and zoning by-laws.
You can also expect the title report to contain released and unreleased mortgages, unpaid taxes, judgments against current or prior owners, and the chain of ownership.
Any legal issues will be discovered when you title search a property.
Outstanding title issues are referred to as title defects. A title defect must be straightened out before the title is transferred unless title insurance covers the problem.
Transfer of ownership can take place when there is a marketable title.
How Do They Work?
Your title search company will delve into the public records to find documents relating to the home.
They should locate documents that show the property’s rightful owner. They will also look for documents that show if anyone else has any legal claims or financial interest in the property.
When you search for a property title, the title agent will look at many different sources of documents to ensure the title is clear. These will include:
- Property deeds
- County land records
- Federal and state tax records
- Court judgments
- Bankruptcy filings
- Divorce cases
- Child support cases
- Death certificates
- Marriage licenses
The search should reveal any critical information that a buyer needs to know. Outstanding debts, liens, and easements of any type should also be indicated in the title search.
When you buy a home, you want the title search to return precise results that show the seller as the rightful owner of the house. They should put your mind at ease about any potential title problems later on.
A title warranty can help reduce the potential risks of these issues, and a title insurance policy also offers protection.
When purchasing any property, a title search is crucial to real estate due diligence.
What Title Agents Look For in a Title Report?
- Clerical errors – It is not uncommon for some administrative errors that could impact the legality of the deed.
- Encumbrances – an encumbrance will not stop a sale but could impact the value of a home purchase. A closer look to see precisely what the hindrance entails will be essential.
- Outstanding claims—As mentioned previously, outstanding liens placed against a property are not unusual. Mechanics liens and special assessments are among the most common.
- Property disputes—Recorded property surveys may show something different than what was promised to a buyer. Encroachments might also need to be addressed before the home can close.
- Impersonation – although rarer, it is possible that a false identity was used to acquire a property.
- Building code violations—The property title could be impacted if the local government has taken action against the current owner for violating local or state building laws.
- Municipal charges—If there are public services such as public sewer and water, water or sewer assessments could go unpaid.
What is a Clean Title vs. a Dirty Title?
A clean title is proof of property ownership with no claims against it. A dirty title, on the other hand, indicates issues. Property searches are conducted to ensure a buyer does not purchase with a messy title.
Examples of a dirty title include items from the list above.
What Are Deed Restrictions?
A search can also uncover any restrictions on how the property can be used. Deed restrictions can limit the amount of construction allowed on the lot.
The city or county might set a restriction like this, and you should know about it before you purchase the home.
Other possible deed restrictions:
- Fence building
- The number and type of vehicles parked
- Consideration of the neighbor’s view
- Rules about adjacent structures
- Building approvals
- Number of bedrooms allowed
- If home businesses are allowed
- Restrictions on pets
- The external color of the property
As you can see, knowing the deed restrictions is very important before you sign the dotted line and complete closing.
There may also be restrictive covenants providing guidelines on what one can and cannot do within the neighborhood.
These covenants are recorded in the registry of deeds.
Easements Can Be Present
The property title search should also show any easements. This is an easement if a third party has the right to access the property.
Utility companies sometimes require this to allow maintenance access. Other everyday situations include neighbors crossing the land to access their property.
If there are any easements on the title, you’ll want to know about them.
Boundaries Can Become Issues
The search should also include the property boundaries for the lot. Even when the boundary lines appear to be well defined, with fences or walls marking the limits of the property, there is still the potential for problems.
Disputes can quickly begin with neighbors over incorrectly positioned fences and even additions to the home. Even if this were the previous owner’s fault, the current owner would have to deal with the consequences.
When Are They Done?
A title search happens when the lending institution orders a preliminary title report from either the title company or the real estate attorney representing the seller.
The title search is typically done early in home-buying but could be done anytime.
When a property is purchased without a lender, the title search could occur anytime before the scheduled closing date. It would be advisable not to wait until days before closing in case of a title issue.
If the title search is conducted right before closing and title defects are discovered, it could delay the consummation of the sale.
How Long Does it Take to be Completed?
The time it takes for the property title search results to be reported depends on the case’s complexity. Some searches need to source documents from many places, slowing things down.
In most circumstances, property searches will be completed in 10-14 days.
When all the documents have been found, reporting the results can take a few hours or weeks. It will also depend on how busy the title search company is and how quickly they can review the documents.
It would be best if you assumed it would take at least a week on top of the time it takes to collect the documents.
Older homes are more likely to have more documents, leading to a longer delay in completing this process.
New homes will have fewer owners, which will be an easier and faster job for the title company.
Whatever the age of the house you are buying, you’ll want to make sure the title company does a thorough job to avoid future problems.
When the process has been completed, you will receive a report based on the documents related to the property, highlighting any issues.
How Much Does it Cost?
Some people wonder if a title search is free. The answer is NO. It is not.
You can expect to pay around $150 for a basic report but perhaps as much as $500 for a full, in-depth report on ownership.
Costs will vary between states, and your required information is also a factor.
The cost of the search is included in your closing costs. Examinations can also be required in situations other than closing on a home, but this is the most common situation.
What is a Title Commitment?
The title commitment is the document that will be presented to a home buyer. The commitment documents the exclusions, requirements, and exceptions behind issuing title insurance on the property.
It will be issued when the property title searches are completed. It is also a guarantee you can get title insurance.
Without having a title commitment, prospective homebuyers won’t know about any unique legal characteristics of a particular property. You will receive a title commitment letter before closing.
What is Lender’s Title Insurance?
When buying a house for the first time, you will be introduced to the mortgage term known as title insurance. Like other forms of insurance, real estate title insurance policies can be essential.
The lender’s title insurance will protect the lender against title issues and other problems, such as a legal claim against the home.
Unlike traditional insurance, which guards against future events, title insurance provides coverage for claims arising from issues before the policy was issued. This can include problems like undisclosed heirs, forgery, or errors in public records.
A lender’s policy is usually required of all buyers when purchasing a house with a mortgage.
The lender’s title insurance will only protect the lender and does not protect the owner’s rights.
What is Owner’s Title Insurance?
Having an owner’s policy is optional when purchasing a home. However, most real estate attorneys and possibly your real estate agent will recommend having owner’s title insurance.
The good news is there will be a one-time fee to protect you from legal issues with the title for as long as you own the property.
Owners’ title insurance will protect you from claims made if someone sues and makes a claim against the property before your ownership.
The cost of title insurance can vary quite a bit. You can typically expect to pay anywhere from $1000 to $2000. Title insurance pricing will vary based on the price of the home and the mortgage amount.
Pricing could also be influenced by the title search and any issues discovered on the property’s title. Title insurance will give a home buyer peace of mind if there are any legal claims.
For buyers, an owner’s title insurance policy safeguards their equity in the property, while a lender’s policy protects the mortgage provider’s interest. Given the complexity and potential financial implications of title issues, I always recommend my clients purchase title insurance.
Respected Title Insurance Companies
You might be wondering who the most well-known title insurance companies are. Here are some of them:
- First American Title Insurance Company
- Fidelity National Title Insurance Company
- Old Republic Title
- Chicago Title Insurance Company
These companies are part of the American Land Title Association (ALTA), the national trade association representing more than 6,400 title insurance companies, title agents, independent abstracters, and real estate attorneys.
Title Search Near Me
Are you wondering where to get a title search?
If you want a title search on a specific property close to your current location, a Google search should help. You can search for who will do a title search near me or a title search company near me to find any local title companies or real estate attorneys specializing in title searches.
Finding someone to handle the title search is vital when paying cash for a property.
Final Thoughts
Hopefully, by now, you have a much better understanding of the purpose of a title search. The title search stage of the closing process might seem confusing, but it is crucial. Missing out on this process could lead to complicated and costly problems later on.
Now that you know more about this part of the closing process, it might not seem so bad if your closing date is pushed back because of it.
With more information about what happens during the closing, you should feel more at ease with the process and understand the benefits of the different stages. Property searches are a vital part of real estate.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided real estate information on a title search and how it works. Bill has expertise in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications in which he has been featured. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. For the past 38+ years, Bill has helped people move in and out of Metrowest towns.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
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