Mortgage Dove

Title Search What it is and Why you Need One Before Buying Property

When buying a home, a title search is a crucial step. Legal property ownership is confirmed, and any claims against it are identified. Discovering the property owner is just the beginning. A title search involves looking into public records to verify the ownership history and ensure that the seller is the legal owner. This search digs into the property's history to root out any other financial and/or legal claims on the property that could become your responsibility. Read on to learn why you need a title search before buying property, how it works, and how to protect yourself with title insurance.

What is a Property Title Search?

A property title search involves investigating public records to establish and verify the legal ownership of a property. This process involves examining various means, such as tax liens, land records, deeds, and court judgments. Title companies typically conduct title searches. Still, individuals and businesses can also request them at any time to identify any claims or liens on a particular property. A clear title is essential for closing any real estate transaction. It is impossible to complete a transaction if a property title search reveals a lien or other ownership issues.

Why is a Title Search Important?

You need to know more than who owns the property you want to purchase. There could be claims against the property's title that the current owner is unaware of, and previous owners' debts can still affect the property even after they've sold it. Mortgages, liens, easements, and restrictive covenants all stay with the property, not the owner. Due to this, lenders require title searches and title insurance as part of their underwriting procedures. Skipping a title search or having a failed one could result in encumbrances such as unpaid property taxes, homeowners association (HOA) fees, and bills for past home improvements becoming your responsibility.

How Do Title Searches Determine Who Owns A Property?

Title searches are conducted to verify whether the seller owns the property legitimately. Conducting a title search involves examining public records related to the property. As part of the process, a title company or attorney typically reviews various legal documents to establish a chain of titles. A title search also helps uncover any financial or legal claims against the property.

The Process

An individual responsible for conducting the title search is known as an abstractor . The abstractor will analyze the public records to collect all the pertinent information and legal documents related to the property. This information will then be compiled into an abstract of the title. The abstract of title is a detailed record of all the available documents and transactions associated with the specific real estate property in question. It may contain information regarding the current and previous owners of the property, surveys of the land, and any legal disputes or agreements related to the property, such as easements, wills, and lawsuits.

The Findings

The title search is an essential part of the home-buying process. It aims to reveal any legal and financial claims against the property that may affect your financial stability. Several title problems include outstanding property taxes, liens against the house, and easements. If there are any unresolved claims on the property you intend to buy, it could cause problems for you down the road.

A title search establishes the chain of title and confirms that the seller is the rightful owner. Therefore, ensure that your title search shows clear and uncontested ownership. The person who performs the title search is called an abstractor. An abstractor examines public records and gathers all relevant information and legal documents about the property. An abstract of title contains a chronology of all transactions and documents relating to the real estate under consideration.

The abstract of the title serves as an essential reference for the property's ownership history. It provides critical information for the title search. Abstracts of title may include information about the current owner, previous owners, past surveys, easements that cross the property, and relevant lawsuits and wills.

Thankfully, there are techniques to reduce the chances of a dispute over who owns your newly acquired asset. One such option is by purchasing title insurance or securing a warranty of title. Title insurance is a one-time purchase that can protect your ownership claim of the property. By purchasing title insurance, you can cover any legal and financial claims against the property and protect your property ownership. The cost of title insurance is usually 0.5% to 1.0% of the purchase price and is generally included in your closing costs.

Special Considerations

When purchasing a home, a title search is essential to confirm no ownership issues exist. Typically, a lawyer or a title company conducts this search. They look through public records to verify the chain of ownership and ensure that the seller is the legal owner of the property. After the search, you will receive a preliminary title report detailing any possible issues or problems. Some cases may be simple to resolve, while others may be more complex and could impact your loan commitment. In case of any problems, you can talk to the seller and decide whether you'd like to continue with the purchase. Consult your attorney and real estate agent in these discussions.

Dirty Title vs. Clean Title

After conducting a title search, the legal ownership of a property becomes apparent, and any claims on the property are uncovered. If no issues are found, it's considered a clean title, which proves sole ownership of the property or land. However, if there are any unresolved building code violations or erroneous surveys, it could result in a dirty or defective title . There could be errors made during the registration process, such as misspellings or information misapplication by a county office filing clerk. A dirty title may also have unknown liens or encumbrances on it.

Title Insurance

A title search conducted by an experienced professional can occasionally overlook something or make a paperwork error that leads to a document not being found. It can be very costly if an issue with the property is discovered after the purchase. Hence, this is why it is common for buyers to purchase title insurance . Buyers and mortgage lenders can be protected from financial loss when title-related problems arise during or after the sale.

Title insurance can protect against loss or damage resulting from liens, encumbrances, or defects in a property's title or actual ownership. In contrast to traditional insurance policies, which cover claims for future events, title insurance covers claims for past events.

An owner's title insurance typically covers the following risks:

  • Ownership by another party
  • Incorrect signatures on documents
  • Forgery and fraud concerning title documents
  • Defective recordation
  • Restrictive covenants
  • Encumbrances or judgments against the property

Who Conducts the Title Search?

An attorney or title company  usually performs a title search as part of the home-buying process. However, in some cases, the lender or the individual home buyer may undertake this process themselves. To conduct your title search, you can obtain the necessary records from the county courthouse, the recorder's office, and the county assessor's office. Nonetheless, it would be best to allow professionals such as real estate attorneys to handle this aspect of the home-buying process. Legal documents can be confusing for someone without legal expertise, and you could miss important details accidentally.

A Title Search Example

Let's imagine you are looking to buy a new home and have found a property that interests you. Before making an offer, you want to ensure a property has a clean title, so you hire a title company to conduct a search.

The title company will collect legal documents related to the property, including public records, court records, and county office records. They will thoroughly review this information to determine if the property has any liens, encumbrances, or other defects that could prevent you from completing the purchase.

If the title appears clear, you can proceed with the transaction. However, if any defects are found, the transaction can only proceed once they are resolved. Depending on the type of defect, this process may be relatively simple or quite complicated. For example, a clerical error might be easily corrected, while a lien against the property could take longer to resolve.

The Bottom Line

A title search is an essential component of the home-buying process. Still, other factors can be confusing for a home buyer. Suppose you want to feel more confident about your home purchase. In that case, it's crucial to thoroughly comprehend the various aspects of the process. With a better understanding, you can make informed decisions and move forward confidently, knowing the purchase is in your best interest.

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