After you've searched for a home and decided on the perfect property, there's another search: the title search. While title search may not be as exciting as browsing these listings or dreaming of moving in, it is a crucial step in a real estate transaction and can impact your purchase if problems arise. Here's what you need to know.
What is a title of property?
The title of a property is the term used to describe the rights of the owner. It's not a document like the deed, but "relates to the concept of property rights," explains Megan Hernandez, director of marketing and public relations for the American Land Title Association.
When you buy a home, you want to make sure that only the seller is entitled to the property. This confirms that there are no further claims or liens on the property and that the seller actually has the right to sell his home to you in the first place. This is where a title search comes in.
What is a property search?
A property title search is the process by which a property company or attorney reviews public records to make sure there are no claims, liens, or issues with a property that could result in another person or entity claiming interest in the home to have.
"This search is being conducted to ensure that marketable ownership of the property can be obtained and that no encumbrances affect the property rights of the buyer," said Sarah Stitgen, associate attorney at Cook & James, a law firm in Roswell, Georgia.
Stitgen advises that a title search is mandatory for any property transaction that requires property insurance. This includes homes acquired with financing as mortgage lenders need a title search to raise funds for the loan.
"Think of a house title search like checking the background of an employer on a job applicant," said Landy Liu, general manager of Better.com's home insurance, title insurance and trust insurance. "That also protects the lender."
Who completes the title search?
A lawyer or a title company usually carries out the title search, which is usually initiated after the conclusion of the contract between seller and buyer. However, the steps required may vary depending on your location.
"In New York City, searches are conducted by independent title companies," said Greg Maybaum, a real estate attorney in New York City. “Once the contract is signed, the buyer's attorney usually orders the title search, and either that attorney or the title company provides the seller's attorney with the completed report. It is the job of the seller's lawyer to manage and resolve title issues with the title company. "
The company or attorney usually conducts the investigation in the office of the district or township clerk where the property is located. Much of the required records are now available online, often eliminating the need for the seeker to physically go to an office to conduct the search.
"This person reviews many sources of information related to the property," explains Suzanne Hollander, attorney and real estate professor at Florida International University in Miami, such as:
• Map of the district
• Land platforms
• Tax liens (federal or state)
• Divorce cases
• Bankruptcy Court Records
• Succession cases
• Building lien
A thorough title search will likely also include details about mortgages associated with the property, road and sewer ratings, taxes, and other existing title issues, Hollander says.
Once all of the information has been gathered, the title company or attorney will produce an abstract report that will show what was found related to the title.
How long does a title search take?
The title search can only take a few hours, but in most cases between 10 and 14 days. In general, the older the home, the longer it takes to search for a title. When there's a long line of owners and transactions involving the property – say, a home equity loan against it or a past property line dispute – more work is needed to make sure there is a clear title.
"The search can go back as far as 50 years or as far back as is necessary to identify the deed and review any further transfers of ownership," says Stitgen. "This ensures that there is a proper chain of ownership from fellow to fellow to the current owner."
What if I have problems searching for a title?
A title search can reveal one or more problems with the title. Here are some common title problems, along with strategies for resolving them:
• Break in the title chain: This problem can occur if a certificate is missing from the chain. "If Party A transfers ownership to Party B and Party C transfers the same ownership to Party D, we lack the link between Parties B and C," says Stitgen. "This can be resolved by obtaining a deed from party B to party C or a deed from party B to party D."
• Improper or missing legal description of the deed: Depending on the nature of the error, this usually requires obtaining a corrected deed from the same parties in order to correct the error. “In some cases, an affidavit from a scrivener, preferably the party who created the document or recorded the document, to someone with knowledge of the transaction may be sufficient to resolve the problem, but only if the error is insignificant and not change the legal form, ”says Stitgen.
• Potentially Lack of Interests: If the chain of ownership involves an inheritance transfer, it is important to ensure that all heirs have properly given up their interests in the property. "If this has not happened, documents must be obtained from these parties that approve their interests," says Stitgen.
• Open Securities Deeds: The Security Search can reveal an open securities deed of the current or previous owner that has never been released. “If so, some research needs to be done to see if this is being left open in error. If this is the case, you must obtain approval from the holder of the security deed, ”advises Stitgen.
• Liens: A lien is a legal right or claim on a property that is commonly used as security to settle a debt. A title search often identifies potential liens on a property. These will require additional research to find out if the lien has expired, whether it might not actually apply to a party in the chain of ownership, or whether it is a valid lien that needs to be paid.
• Unpaid Property Taxes: Any outstanding property or value taxes, based on the appraised value of the home, must be paid before the property is transferred to the new owner.
If any of these or other issues are identified, Hollander says home buyers typically have three options, depending on what is allowed in their sales contract:
1. Ask the seller to resolve the problem before closing.
2. Ask the seller to reimburse the buyer for the cost of fixing the problem.
3. Exit the store and receive a refund of the deposit.
Title service costs
Home buying involves many expenses outside of the actual home price, and title search is added to the overall tab. There are two main costs to title services provided by a title company or an attorney:
1. Processing service fees: These include expenses incurred in processing the loan, such as B. Costs of transfer fees, escrow and title insurance policy. According to Liu, the latter includes the fee for the title search and the costs of fixing the problems discovered. The price for a title search alone is often between $ 75 and $ 100 and can be paid by the buyer or seller if the parties agree.
2. Property Insurance Premium: “Property insurance secures the buyer or refinance of the home as the legal owner of the property,” explains Liu. “The premium is a one-time cost that is paid upon conclusion and can be between 0.5 percent and 1 percent of the purchase amount. Since it is a percentage of the purchase amount, your premium may increase as your loan amount increases. "
Can I do my own title search?
Anyone can search property records through their district official's office, and no law says you cannot do a title search yourself. However, the experts strongly advise against sorting through the details of a property yourself.
“Performing a title search requires knowledge of property requirements and deposit deadlines, as well as the ability to navigate various court records. It is not advisable to do this without any experience due to the complexity of the records and indexing, ”said Patti DeGennaro, Senior Operations Manager and Process Specialist at Title Alliance, Ltd. in Media, Pennsylvania.
"If you want to get property insurance for your property, it is not enough to do the property search yourself as the property insurer requires professional execution, verification and search advice before issuing a policy," added Stitgen.
Anyone can search real estate records through their county clerk's office, but experts strongly advise against sorting through the details of a real estate title yourself.
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