The Title Exam is a thorough examination by a title agent of all public records that affect the property a buyer is purchasing. Such public records include county, municipal and those date records stored in a “title plant”, a data storehouse maintained by the title companies.
What the title agent is searching for is any defect or “cloud” in the title. He or she does this by reviewing prior mortgages, judgments, and liens to make sure they were all paid in full and past wills, deeds and trusts, making sure the title has passed correctly to each new owner. This last requires a name search and a close examination of all previous
By examining this “chain of title”, the title agent can determine if the title has any clouds on its history that might affect the title adversely. Unpaid taxes, an unsatisfied contractor’s lien, a boundary dispute, even fraudulent documents can make the title of the property invalid because a claimed prior holder of the
title never legally owned the property or there was an inaccurate description of the property or for many other reasons.
If those defects are cleared up, the title is declared “Marketable” and the property may proceed to closing. If not, the title agent must decide if the defects can be cleared up or are insignificant enough not to affect the title in the future and declare the title “Insurable.”
For a one-time fee, the buyer may buy a title insurance policy indemnifying the buyer from any future defects in the property’s title that may crop up later after closing. Title insurance not only protects the buyer from financial loss and legal fees, but the title company will go to court with the buyer if a title defense is ever
needed. An Owner’s Title Insurance Policy protects the buyer the entire time he or she owns the property. Some mortgage lenders insist on a Lender Title Insurance Policy being issued to protect their institution from similar loss and legal fees.
For more information about title examinations, visit www.alta.org.