A Step-By-Step Review of Title Searches
You’ve decided to purchase a home and hope to take possession as soon as possible. The terms have been agreed upon and all the financial arrangements have been made. But there’s one important detail remaining. Before the transaction can close, a title search must be made.
The most accurate description of title is a bundle of rights in real property. A title who owns them.
A title search is a means of determining that the person who is selling the property search is the process of determining from the public record just what these rights are and really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for.
The search process can be undertaken by the title company in those jurisdictions where the company maintains offices. In some areas, however, searches are made only by practicing attorneys. However the search is performed, in most real estate transactions today, a title insurance policy is purchased to insure the buyer that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process. This leads to the issuance of a title policy, which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the title and pay losses within the coverage of the policy if they occur.
But what, exactly, is involved in a title search? Here is a step-by-step review:
Chain of Title
This is simply the history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records – usually a county clerk’s or recorder’s office – or obtained from title plants privately owned and maintained by title companies. There are great varieties of such plants – index cards, punch cards, tract books, even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be secured.
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or weather any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, weather or not these assessments are current or past due.
A due and unpaid tax or special assessment is a prior lien or claim on the property above all others. If a buyer purchases property with unpaid and past due taxes or assessments against it, he or she is likely to find a government body – the village, county or state – placing the property up for sale to pay those taxes or assessments. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.
Report On Possession
Many title insurance companies send inspectors to look at the property to look at the lot size, check the location of improvements, look for evidence of easements that are not shown on record, and check on who is living there.
The purpose of this is to supplement the information learned from the title search. In the eyes of the law, any buyer of real estate is assumed to have notice of all matters properly shown in the public records as to that real estate as well as any information that an actual inspection may reveal.
If the inspector detects an unrecorded easement or other evidence of outstanding rights that could affect the owner’s title and possibly the value and intended use, the company tells the buyer of these things before he closes his purchase. Those matters must then be either disposed of or shown as exceptions in the title insurance policy. Sometimes when an acceptable survey and appropriate affidavits are received, an inspection will not be made.
Judgement and Name Search
One of the most important parts of the title search is to determine if there are any unsatisfied judgements against the seller or previous owners which were in existence while they owned the title. A judgement is a general lien against the debtor’s real estate and constitutes security for any money owed under the judgement. The real estate can be sold to satisfy the judgement.
For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt, Schmidz, Schmied, Schmiedt, Smid, Smyhthe, and so on. The name Nichols can be spelled 73 different ways, from Nachols to Nychals. The task is to determine which of these applies to the owner in question. First names have to be checked, too. There are 25 foreign forms of John, including Johann, Jehan, Hans, Shaun, Gudi, and Efom.
Rights established by judgement decrees, unpaid federal income taxes, and mechanics’ liens all may be prior claims on the property, ahead of the buyer’s or lender’s rights. If a judgement is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgement.
When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and the seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title which may have been uncovered by the search and examination.
The mortgage lender is as concerned about the quality of the title as the buyer because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property. This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.
The lender’s title insurance, however, doesn’t protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender’s title insurance policy are very different from those of a buyer’s policy, so the buyer should obtain his own policy, often issued simultaneously with the lender’s policy.
(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)
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