With housing inventory still lagging, sellers continue to have the upper hand.
What is a title search?
A title search is the process of going through public records, regarding a piece of property to ensure that the current owner has the legal right to transfer ownership. A title search identifies issues in the chain of title, liens and other tax issues, problems with the legal description of the property, judgments against the owner, and other issues that could prevent the buyer from taking ownership or using the property.
A thorough title search can uncover any defects in the property’s history so that the buyer gets all of the rights associated with the property he paid for. A proper search includes information from public records, regarding both the property and the owner. There are several steps involved in a title search to analyze all aspects of a title’s history.
Chain of title refers to the history of ownership of a piece of property. It essentially lists all of the buyers and sellers of the property plus dates when the ownership changed hands.
Tax search uncovers the current tax status of a piece of property, such as any unpaid taxes or liens against the property. A tax search also can reveal if any special assessments have been levied against the property.
The legal description of the property on record must match the actual property. An inspector looks at the property to determine if the legal description notes the correct size and includes any improvements made to the property or evidence of easements. Problems with any of these could affect the value of the property or the buyer’s ability to use the property.
Judgments against the owner include any liens or debts against the owner or seller that can affect the property. The lien against the property means that the property can be sold to satisfy the judgment.
These liens all come before the rights of the buyer, and the owner must rectify these defects before selling the property.
Title search example
You have found your dream home, and you’re ready to buy it and move in right away. Before you can become the rightful new owner, you must perform a title search.
You can do this on your own or by hiring a title search company to do all the legwork for you. The information you need is often available by searching for the property’s deed through the tax assessor’s records.
In your search for all of the records regarding the property you wish to purchase (or have already purchased), you find that a third party actually holds a claim to a part of your property due to a previous mortgage. Even though this old debt is not yours, this third party can still place a lien on your property until the debt is paid. Fortunately, many states have laws that prohibit owners from selling property that has a judgment against it.
A title search also can return surveys of the property from several sources. Ideally, all of the surveys show the same information.
However, it is possible that the title search uncovers documents, with conflicting data regarding property lines. This could lead to disputes with neighbors or other parties who may be able to lay claim to a portion of your property.
Identifying these issues prior to closing on the home and taking ownership puts the burden on the seller to remedy the problem. After finalizing the sale, it is up to you to resolve any issues.
Buyers can protect themselves from these issues with title insurance. These policies protect buyers against property loss or damage caused by any issues that arise after the property has transferred owners.