A title search is an essential part of any real estate transaction. It involves researching public records to ensure the seller has clear title to the property and identify any issues like liens or encumbrances that could affect ownership.
The goal is to confirm the seller’s legal right to transfer ownership to the buyer through a title insurance policy.
Title Search — Defined
A title search, sometimes called a title examination, is the process of reviewing public records to verify who the legal owner of a property is and if there are any problems with the title that could affect ownership rights. This research is done by a professional, usually on behalf of the buyer.Understanding the Essence of Title Search
Conducting a title search in Real Estate is a critical step when purchasing a property. It ensures the buyer is obtaining full ownership rights from the seller who can legally transfer the real property. A title search identifies any issues like unpaid taxes, mechanics’ liens, zoning violations or unreleased mortgages that could result in future legal claims against the property. This protects the buyer’s investment and provides peace of mind that the title is clear.The Role of Title Companies in Property Transactions
Title companies employ professionals to thoroughly research property records, tax documents, court filings, surveys and more to uncover any title defects. This involves checking records at various government offices, libraries, and online databases. Title companies have the expertise to know where to look and what to look for.Benefits of Using Title Companies
It is highly advisable for buyers to utilize an experienced title company for title searches. Their seasoned title professionals are familiar with local property records and laws. They can accurately evaluate any risks and recommend title insurance policies that provide protection. Title companies also facilitate smooth closings by ensuring all documents are in order before transferring ownership. With so much at stake in a property purchase, buyers should rely on title company expertise.Diving Deeper: Types of Title Searches
There are a few different types of title searches that may be conducted depending on the specifics of the real estate transaction.Full Title Search
A full title search, also called a complete or exhaustive search, is the most comprehensive option. It traces the property’s full history from the earliest records to present. This involves checking all documents related to ownership transfers, liens, taxes, legal claims, encumbrances, and more. While tedious, a full search provides the buyer with maximum title security.Limited Title Search
A limited or abbreviated title search only examines records back to a certain point in time, such as the seller’s ownership period or the last 20-30 years. While less costly and time consuming, it may miss older defects. This is a calculated risk buyers may take in lower value purchases.Chain of Title Search
A chain of title search focuses on verifying the sequence of valid transfers from one owner to the next. It confirms no breaks in continuity but does not check for other defects like old liens. This is common in some refinance or home equity situations.Grantor/Grantee Title Search
This examines all records associated with an individual buyer or seller, rather than the property itself. It is helpful in identifying any personal legal issues like bankruptcy, divorce or criminal cases that could affect property rights.Chain of Title: Tracing Property History
Chain of title refers to the historical sequence of documentation showing the succession of ownership interests in a property from the original owner to present. It lists each successive property owner, how they claimed ownership, and for how long. Examining the chain of title is a critical component of title searches. The title company will research back to the property’s origins to confirm proper transfers of ownership occurred at each juncture without breaks. This provides assurance that the seller legally obtained the title from previous owners and has full rights to convey it to the buyer. To trace the chain of title, title examiners will thoroughly review documents like deeds, wills, probate records, court judgements, tax records, liens, surveys, plats, and encumbrances. Any gaps in the sequence of valid transfers could indicate a break in clear title. If an erroneous transfer is found, it must be resolved before completing the sale.Tax Search: Unearthing Tax Liabilities
A tax search looks for any unpaid property taxes associated with the real estate. This is critical because tax liens can result in the local government seizing and selling the property to recover the debts. Tax searches review local tax collector records along with county clerk and treasurer documents. Any delinquent taxes discovered must be satisfied before closing for the buyer to receive clear title. Even old unpaid taxes from a previous owner could become the buyer’s liability once transferred. Conducting a thorough tax search avoids inherited tax debts that could lead to property loss.Judgement and Name Search: Ensuring No Liens
A judgment and name search looks for any court judgments or liens filed against the seller or previous owners. Liens like mechanics’ liens, child support liens, or legal judgments could present claims against the property. The title company will check court records, listings, and state databases to uncover any concerning liens. Undisclosed liens may remain attached to the property after sale. This search ensures the buyer does not inherit any unknown monetary obligations tied to the real estate.The Commitment: Assurance before Finalization
After thoroughly conducting all aspects of a title search, the title company issues a title commitment or binder. This legally binding document states the company’s willingness to provide title insurance on the property, pending clearance of any final title defects. It provides assurance that the search was comprehensive and the title will be clear at closing, allowing the buyer to safely proceed with the transaction. Title professionals understand how critical a defect-free title is for new owners to rightfully possess the property. A title commitment gives buyers confidence that the title search revealed no concerns impacting legal ownership.Why Mortgage Lenders Care About Title Searches?
When providing buyer financing, mortgage lenders need assurance their investment in the property will be secure. A clear title search provides this protection:-
- Verifies seller legally owns the property and can transfer title
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- Uncovers risks like liens that could jeopardise lenders’ rights
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- Reduces chances of claims against property down the road
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- Ensures no defects preventing buyers from repayment ability
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- Provides backing for lenders to safely issue a mortgage loan
