Understanding a title search is a crucial aspect when purchasing a house or other real estate.
Buying a home can be an exciting experience, but it also has the potential for a lot of stress. While you might be eager to finish the buying process and move in, there are a lot of required stages to go through to make sure everything is legal.
Many of the stages to closing on a home have the potential to delay your closing date. If you don’t understand why these processes are taking place, it can add to your frustration. The title search is one of the parts of closing that can confuse home buyers and delay closing.
If you’ve ever wondered what a title search is, what it involves, or if you really need it, we have the answers. Let’s take an in-depth look at the importance of performing a title search when buying a home.
A property title search is a critical aspect of a real estate transaction for a good reason.
What is a Title Search?
The property title contains details of who legally owns the home. While these documents should give you all the information about liens on the property and who owns it, they might not be up to date.
The property title might also be missing a lot of the history you’ll want to know when buying the home.
Using a title search company gives you a more thorough search of the records to find documents that would otherwise be hidden. Title searches will find out who the home’s legal owner is and reveal anyone else who has a claim on the property.
There could be liens on the property that will need to be resolved before closing. If the home has had any improvements, the contractor could have put a lien on the title if they weren’t paid, for example.
When a homeowner misses paying HOA fees or their property taxes, it should be revealed in a title search. Sadly, if you were to buy the home without a title search, and there are liens on the house, they could become your responsibility.
If this were to happen, you could be left with a hefty bill to pay that could put you in financial difficulty. For this reason, a mortgage lender typically wants to make sure title searches are completed, and they also sometimes require title insurance in case something gets missed.
What is a Chain of Title?
A chain of title is a property’s history of the transfer of ownership. When buying a specific piece of property, a title searcher will be hired to trace the chain of title to ensure a seller has valid ownership.
The chain of title can be conducted by title companies or a real estate lawyer. Legal ownership of the property will be established once the chain of title work is completed. The chain will run from the current owner back to the original owner.
A chain of title will be one part of the process giving the prospective buyer and mortgage lender assurances there is a legal right to sell the property.
What is an Abstract of Title?
An abstract of the title is a version of the history of a property. It will specifically look at ownership changes, whether through a traditional sale, foreclosure, tax sale, inheritance, or personal gift.
The abstract of the title document will also include any potential legal problems such as encumbrances, encroachments, liens, easements, and unpaid property taxes. It can also be referred to as the title abstract.
Who Does a Title Search?
A thorough title search will be conducted by a lender’s real estate attorney or title company as part of the home buying process. The law firm representing the bank could also refer the work out to a specific title examiner.
A title report will be generated from conducting the title search. The title report will contain a significant amount of pertinent information regarding a property. There will be a complete legal description of the property and info on the current taxes, property value, and zoning by-laws.
You can also expect the title report to contain released and unreleased mortgages, unpaid taxes, judgments against current or prior owners, and the chain of ownership. Any legal issues will be discovered from doing the title search.
Outstanding title issues will be referred to as title defects. A title defect will usually need to be straightened out before the transfer of the title unless title insurance covers the problem. Transfer of ownership can take place when there is a marketable title.
How Do Title Searches Work?
Your title search company will delve into the public records to find documents relating to the home. They should locate documents that show who the rightful owner of the property is. They will also look for documents that show if anyone else had any legal claims or financial interest in the property.
The search will look at many different sources of documents to ensure the title is clear. These will include:
- Property deeds
- County land records
- Federal and state tax records
- Court judgments
- Bankruptcy filings
- Divorce cases
- Child support cases
- Death certificates
- Marriage licenses
The search should reveal any critical information that a buyer would need to know. Outstanding debts or liens, as well as easements of any type, should be indicated in the title search.
When you buy a home, you want the title search to return precise results that show the seller as the rightful owner of the house. They should put your mind at ease about any potential title problems later on.
To reduce potential risks of these sorts of issues occurring, a warranty of title can help, or a title insurance policy also offers you protection.
Doing a title search is a crucial part of real estate due diligence when going through the purchase of any property.
What Title Agents Look For in a Title Report?
- Clerical errors – It is not uncommon for there to be some kind of administrative error that could impact the legality of the deed.
- Encumbrances – an encumbrance will not stop a sale, but it could impact the value of a home purchase. A closer look to see precisely what the encumbrance entails will be essential.
- Outstanding claims – as mentioned previously, it is not unusual to find outstanding liens placed against a property. Mechanics liens and special assessments are among the most common.
- Property disputes – Recorded property surveys may show something different than what was promised to a buyer. There might also be encroachments that need to be addressed in order for the home to close.
- Impersonation – although rarer, it is possible that a false identity was used to acquire a property.
- Building code violations – The property title could be impacted if the local government has taken action against the current owner for violation of local or state building laws.
- Municipal charges – if there are public services such as public sewer and water, there could be water or sewer assessments that have gone unpaid.
What Are Deed Restrictions?
A search can also uncover any restrictions on how the property can be used. Deed restrictions can limit how much construction is allowed on the lot.
A restriction like this might be set by the city or county and is something you will want to know about before you purchase the home.
Other possible deed restrictions:
- Fence building
- The number and type of vehicles parked
- Consideration for the neighbor’s view
- Rules about adjacent structures
- Building approvals
- Number of bedrooms allowed
- If home businesses are allowed
- Restrictions on pets
- The external color of the property
As you can see, knowing about the deed restrictions is very important before you sign on the dotted line and complete closing. There may also be a set of restrictive covenants providing guidelines on what you can and cannot do within the neighborhood.
These covenants are recorded at the registry of deeds.
Easements Can Be Present
The property title search should also show any easements. If a third party has the right to access the property, this is known as an easement.
Sometimes this can be required by utility companies to allow access for maintenance. Other common types of situations include when a neighbor needs to cross the land to access their property. If there are any easements on the title, you’ll want to know about them.
Boundaries Can Become Issues
The search should also include the property boundaries for the lot. Even when the boundary lines appear to be well defined, with fences or walls marking the limits of the property, there is still the potential for problems.
Disputes can quickly begin with neighbors over incorrectly positioned fences and even additions to the home. Even if this were the previous owner’s fault, the current owner would have to deal with the consequences.
When is a Title Search Done?
A title search happens when the lending institution orders a preliminary title report from either the title company or the real estate attorney representing the seller. The title search is typically done early on in the home buying process; however, it could be done at any time.
When a property is purchased without a lender, the title search could occur anytime before the scheduled closing date. It would be advisable not to wait until days before closing in case there is some kind of title issue.
If the title search is conducted right before closing and there is a title defect discovered, it could delay the consummation of the sale.
How Long Does it Take For a Title Search to be Completed?
The time it takes for the results of the title search process to be reported depends on how complex the case is. Some searches will need to source documents from many different places, slowing things down.
When all the documents have been found, it can take a few hours or a few weeks to report the results. It will also depend on how busy the title search company is and how quickly they can review the documents.
It would be best if you assumed it would take at least a week on top of the time it takes for the documents to be collected.
Older homes are more likely to have more documents, leading to a longer delay in completing this part of the process. New homes will have had fewer owners, so this will be an easier and faster job for the title company.
Whatever the age of the house you are buying, you’ll want to make sure the title company does a thorough job to avoid future problems. When the process has been completed, you will receive a report based on the documents related to the property, highlighting any issues.
How Much Does a Title Search Cost?
Some people wonder if a title search is free. The answer is NO. It is not.
You can expect to pay somewhere in the region of $150 for a basic report, but perhaps as much as $1,000 for a full in-depth report on ownership. Costs will vary between states, and the level of information you require is also a factor.
The cost of the search forms part of your closing costs. Examinations can also be required in other situations aside from closing on a home, but this is the most common situation.
Can You Do Your Own Title Search?
Yes, you can do your own title search, but it is not advisable. A title search can be started by going online with the street address. You can also look using the search term land records and your state, and you should be directed to some online systems or local title plant.
If you want to reduce your buying expenses to the minimum, it might seem like doing your own title search is a good idea. While you can do your title search, should you? If you choose to do it yourself, it requires a lot of work on your part; however, if you miss something, the consequences could be expensive.
In order to do this, you will need the legal description of the property, which sets out the boundaries and will likely have been created by an attorney. The legal description of the home isn’t simply the address, so don’t make that mistake.
You’ll Probably Have to Go Offline Too
When you have the legal description, the next stage is to get the title deed information which will likely require a trip to the relevant courthouse. If you are fortunate, this will be available online, but you will have to take a ride to the courthouse most of the time.
Not Worth The Risk – Use Professionals
The title and deed documents should also contain the owner’s name, and you should write this down as you will need it later on.
You will also need to get property tax information from the county assessor’s office. You also want to find details of previous owners to make sure there aren’t any heirs or other relatives that could have a claim on the home.
Discovering if there are any court judgments on the home is also extremely important. There might be some fees associated with sourcing these court files, but this will reveal any liens on the property.
If you don’t uncover anything concerning, you have a clear title and can continue purchasing. When completing this work yourself, how can you be sure you’ve not missed anything? If you aren’t used to reading legal documents or don’t know what you’re looking for, you could easily miss something crucial.
What is a Title Commitment?
The title commitment is the document that will be presented to a home buyer documenting the exclusions, requirements, and exceptions behind issuing title insurance on the property. It is also a guarantee you can get title insurance.
Without having a title commitment, prospective homebuyers won’t know about any unique legal characteristics of a particular property. You will receive a title commitment letter before closing.
What is Lender’s Title Insurance?
When buying a house for the first time, you will be introduced to the mortgage term known as title insurance. Like other forms of insurance, real estate title insurance policies can be essential.
Lender’s title insurance will protect the lender against title issues and other problems, such as a legal claim against the home. A lender’s policy is usually required of all buyers when purchasing a house with a mortgage.
The lender’s title insurance will only protect the lender and does not protect the owner’s rights.
What is Owner’s Title Insurance?
When purchasing a home, having an owner’s policy is optional. Most real estate attorneys and possibly your real estate agent will recommend having owner’s title insurance. The good news is there will be a one-time fee, and it will protect you from legal issues with the title for as long as you own the property.
Owners’ title insurance will protect you from claims made if someone sues and makes a claim against the property before your ownership.
The cost of title insurance can vary quite a bit. You can typically expect to pay anywhere from $1000-$2000. The pricing of title insurance will vary based on the price of the home and the mortgage amount.
Pricing could also be influenced by the title search and any issues discovered on the property’s title. Title insurance will give a home buyer peace of mind in the event there are any legal claims.
Title Insurance Companies
You might be wondering who the most well-known title insurance companies are? Here are some of them:
- First American Title Insurance Company
- Fidelity National Title Insurance Company
- Old Republic Title
- Chicago Title Insurance Company
All of these companies are part of the American Land Title Association (ALTA). ALTA is the national trade association representing more than 6400 title insurance companies, title agents, independent abstracters, and real estate attorneys.
Title Search Near Me
Are you wondering where to get a title search?
If you are looking to get a title search done on a specific property close to your current location, a Google search should help. You can search who will do a title search near me or title search company near me to find any local title companies or real estate attorneys specializing in title searches.
When you are paying cash for a property finding someone to handle the title search will be vital.
Final Thoughts on Title Searches
Hopefully, by now, you have a much better understanding of the purpose of a title search. The title search stage of the closing process might seem confusing, but it is crucial. Missing out this process could lead to complicated and costly problems later on.
Now that you know more about this part of the closing process, it might not seem so bad if your closing date is pushed back because of it. With more information about what happens during the closing, you should feel more at ease with the process and understand the benefits of the different stages.
About the author: The above Real Estate information on what is a title search was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 35+ years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.