What Is a Title Search?
A title search is an examination of public records to determine and confirm a property's legal ownership, and find out what claims or liens are on the property. A clean title is required for any real estate transaction to go through properly.
How Title Searches Work
A title search is usually performed by a title company or an attorney, often on behalf of a prospective buyer who may be interested in making an offer on the property. The process may also be initiated by a lender or other entity that wants to verify ownership of the property and determine what claims or judgments against the property may exist before approving a loan or other credit that uses that property as collateral.
When performing a title search, the attorney or title company will conduct research using public records and legal documents to identify the vested owner, the liens or other judgments on the property, the loans on the property and the property taxes due.
While it is possible for a prospective buyer or other individual to conduct a title search on their own, this is not recommended. Legal documents can be confusing, and navigating records at the courthouse can be a tricky process. It would be easy for an inexperienced person to overlook something important.
- A title search is the process whereby the ownership and claims on a piece of real property are evaluated before a transaction can take place.
- In order for most real estate transactions to occur, its title must be found to be clean - i.e. free of liens, back-taxes, or other claims.
- Title insurance is often purchased to protect against a financial loss that may occur if a title is found to have issues.
Issues Discovered in a Title Search
Before you close a deal on the purchase of a home, your attorney or a title company will search public records on the property's ownership. Once the search is finished, you will receive a preliminary title report. If there are any issues or problems with the title, you can point them out to the seller. Depending on the exact nature of the issue, you can then decide whether you want to go through with the purchase of the property. You will likely want to include your attorney and real estate agent in these discussions. Issues discovered via a title search can run the gamut from minor to significant. Some problems are easily cleared up while others may take so long that they jeopardize your loan commitment.
Even a company or professional experienced in conducting title searches can occasionally miss something, or there can be a paperwork error that leads to a document being overlooked. Mistakes can happen, and these mistakes can be costly if you later discover there’s an issue with the property once you have already completed the purchase. For this reason, buyers will often purchase title insurance which can protect you and your mortgage lender from financial loss if a problem with the title arises during or after the sale.
How Title Insurance Works
A clear title is necessary in any real estate transaction. Title companies must do a search on every title in order to check for claims or liens of any kind against them before they can be issued. A title search is an examination of public records to determine and confirm a property's legal ownership and to find out whether there are any claims are on the property. Erroneous surveys and unresolved building code violations are two examples of blemishes that can make a title "dirty."
Title insurance protects both real estate owners and lenders against loss or damage occurring from liens, encumbrances, or defects in the title or actual ownership of a property. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences.
A basic owner's basic title insurance policy typically covers the following hazards:
- Ownership by another party
- Incorrect signatures on documents, as well as forgery and fraud concerning title documents
- Defective recordation (flawed records or record-keeping)
- Restrictive covenants (terms that reduce value or enjoyment), such as unrecorded easements
- Encumbrances or judgments against property, such as outstanding lawsuits or liens
In lieu of title insurance, some private transactions can involve a warranty of title, which is a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property.