The Title Search: What You Need to Know
The title search is an essential part of the period between ratifying the contract on a new home and settlement. While admittedly not the most exciting part of the real estate process, a title search is extremely important. Allow us to explain.
What is a Title Search?
A title search is an examination of public records to confirm a property’s legal ownership and determine what, if any, claims are on the property. In other words, it ensures the property title is legitimate, so that the buyers are certain they are the rightful owners of the property.
A title company or real estate attorney will perform the title search for the buyer. While it is possible for buyers to conduct their own title search, it is not recommended due to the complexity of the documents. Your Realtor will likely recommend a title company to perform the title search. This one-time expense will vary based on the size of the loan and jurisdiction. Title searches are part of a buyer’s closing costs.
The search will examine public records and legal documents to identify the property’s vested owner, liens or other judgments on the property, any outstanding loans on the property, and any owed property taxes due. It also will check to ensure that no one else (such as a missing heir) could claim ownership (full or partial) of the property. The title company will check for any restrictions, easements, leases, or other issues that might affect the property’s ownership. A survey of the property may also take place.
Common Title Problems
- Existing Liens. Any existing financial obligations related to the home, such as unpaid property taxes or homeowners association dues.
- Easements. If another party has the right to use the property a specific purpose (for example, local or state governments).
- Title Chain Issues. Any breaks in the chain of title such as missing names or clerical errors.
- Errors in the Legal Description. May include boundaries, outbuildings, and dimensions.
- Foreclosure Issues. Foreclosure properties can present a variety of title issues such as failure to notify all parties or removal of the former owner from the title.
- Construction Liens. When a contractor does not pay suppliers or subcontractors in full, the monies owed can become a lien against the home.
The search will take approximately two weeks. The title company will issue both a title abstract and an opinion letter, a legal document confirming the validity of the title, before settlement.
If after settlement, an issue with the property arises, title insurance can protect buyers from financial loss related to lawsuits or claims on the property.
We encourage you to read this article outlining the types of title insurance you can purchase.
Most lenders require you to purchase lenders’ title insurance, but you will likely want to buy your own policy as well. For example, if the title was incorrect and another party is the rightful owner of the home, these policies would likely pay you and your lender the home’s value owed.
The Bottom Line
A title search is a must. Use a professional and consider purchasing title insurance as well.
If you have any questions, please reach out. We are always happy to discuss any and all matters related to your home.
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