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 be completed.
- A title search is a process whereby the ownership and claims on a piece of real property are evaluated before a real estate transaction is completed.
- 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 can be purchased to protect against a financial loss that may occur if a title is found to have issues.
How Title Searches Work
A title search is usually performed by a title company or an attorney, and they are usually performed 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 in order to determine what claims or judgments against the property may exist. This process would be conducted 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 another individual to conduct a title search on their own, it is not generally recommended. Legal documents can be confusing, and gaining access to courthouse records can be a difficult process.
An attorney or a title company will search public records on a property's ownership before you close a deal on the purchase of a home as a prospective homebuyer. 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. Some problems discovered via a title search are easily cleared up, while others may take so long that they jeopardize your loan commitment.
Dirty Title vs. Clean Title
A title search confirms a property's legal ownership, and identifies whether there are any claims are on the property. Erroneous surveys and unresolved building code violations are examples of title search findings that could result in a "dirty" title designation. While a "clean" title proves sole ownership of a piece of property or land, a "dirty" title indicates that there is a cloud of uncertainty or discredit hanging over the property or land.
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.
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.
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