Are you working on a real estate transaction and are now wondering: what is a title search? You got told you need to have one done, but you aren’t sure why you should do it or what it even is.
Having a title search done and buying title insurance is one of the best ways to protect yourself against problems that can arise after a real estate transaction. Boundary disputes, defective title, zoning disputes, and how the property gets used are some of the bases for possible future claims against the property.
This explains why you should have a title search done, but not what it is. So let’s get to that now.
What Is a Title Search?
Title searches help determine if the current owner owns the property rights they are trying to sell to the purchaser. The title search company searches through public records in search of liens, property tax assessments, or other encumbrances that have gotten levied against the property.
A report of a “clean title” means that the current owner owns the property free and clear and the property doesn’t have any defects or clouds. Defects and clouds can limit the buyer’s rights to the property.
What Gets Included in a Title Report?
A title report includes all the information obtained during the title search. The report will also indicate the name and contact information for the person who requested the search. Here are some of the other important sections to look for in a title report.
History of Prior Owners
The title search will include a report on the history of all prior owners to the property. The title company will search public records to determine when the property got bought and sold and by whom.
The history search will help confirm that the seller of the property is in fact the current owner. Some property can be owned by more than one person, so it is important to know all current owners are agreeing to the sale in order to prevent future claims against the title.
Location of the Boundary Lines
The title report will provide a complete legal description of the property. The description will likely include the city and county where the property is located and will define its geographical boundaries.
The title report can also let you know if there have been any lot line adjustment agreements recorded against the property. Lot line adjustments are agreements between owners of adjacent property that indicate a permanent change in the boundary lines between the two properties. Current or prior owners may have entered into this agreement to resolve prior arguments over boundary lines.
Lists Any Easements on the Property
Title searches for a property can help discover if any easements burden the property. These easements may include things like the right of the local utility company to install or access its equipment on the property.
Easements can also give the right of access to cross the property. This can include access roads to landlocked property, such as to another person whose property does not have its own access to the road.
Or it can also include pathways to provide access to an area adjacent to the property. For example, this can be a path leading from the public road to the public beach on the other side of the property.
Easements can get created for a number of reasons and there are several types. Some of which may run with the land (stay enforceable after the sale is final) and some that do not. The title report will indicate the type of easements is present.
List of All Liens/Encumbrances Against the Property
The current owner must clear all liens or judgments against the property before selling. These liens can be in the form of mechanic’s liens, judgments, and tax liens. If the current owner is unable to clear a lien, the title report will list the ones that remain against the property.
The title report will also list any outstanding mortgages on the property. If there is, the mortgage will need to be paid out of the purchase price. It may be possible that there is a mortgage on the property that the seller isn’t aware of, so this information may affect the sale.
Lists Any Limitations on the Property
A title trace will also uncover any limitations on how the property can get used. Some of the limitations that can arise are deed restrictions, HOA rules or CC&Rs, local zoning restrictions, and requirements related to the preservation of historical buildings.
Do I Need a Title Search Done?
If you are taking out a mortgage on the property, the mortgage company will require a title search. Even if the transaction will get paid for fully in cash, having a title search done and buying title insurance is still recommended.
A seller can only provide you with the information they know which can be an incomplete picture of the legal status of the property. The seller may not be aware of everything or they can choose not to fully disclose all they do know.
What Is Title Insurance?
Title insurance can get bought by the buyer or seller in a real estate transaction to protect them against future claims on the title. The title insurance company issuing the policy will fight to defend the purchaser against any claims relating to the title. They will also pay to resolve the claim.
Get a Title Report for Every Real Estate Transaction
Now that you know what is a title search, you can see the importance of obtaining and reading a title report before buying or selling real estate. Your title report will help you identify any potential problems. This will give you peace of mind that you know exactly what you are agreeing to in the transaction.
Contact us today if you need a title search completed. We can process residential and commercial title searches anywhere in the U.S.