Searching title is a vital component of the transfer of any real property from buyer to seller. The lending institution usually requires proof of ownership and assurance that the owner has the legal right to transfer their interest before the lender will invest. A lender will also need
to know that there are no encumbrances or liens on the property—usually using the information discovered in a title search to add a level of security to their investment.
Title search reports are also used by experienced investors, who require a “Certified Title Report” prior to a sale or auction. Any litigation, particularly about property rights, requires that a title report be obtained. Audits by the IRS are another reason a title search would be conducted.
So if you are buying, selling, financing, investing or litigating a property, due diligence requires that you obtain a title report and that requires a title search.
The title search explained
The title search, done by an experienced agent of a title company, determines, from a thorough search of public records, who has the legal right of ownership of a piece of property.
A “current owner search” establishes the legal owner and a “chain of title search” establishes the history of the property for a given period of time to the present day. A chain of title is often used for mineral rights, litigation, title insurance and even historical research. These searches create a snapshot
of the legal and financial standing of the property. The chain of title search makes use of public records from the County Clerk or Recorder’s Office and/or from “title plants”, data information storehouses maintained by the title companies.
The title search also looks for “defects” in the title that could pose problems for a buyer trying to obtain a clear title to the property. These defects can be second mortgages, unpaid tax bills, boundary disputes, unsatisfied liens, the simple absence of a required signature or many more “clouds” affecting a title.
These defects must be addressed before clear title can be obtained.
The title search also shows municipal charges that may be due from previous years and the present status of real estate taxes on the property.
Types of documents searched
A well-conducted search will also include a “judgment search’ that will show any bankruptcy or other judgment against the seller or prior owners that is attached to the property. If any unsatisfied judgment against the seller or previous owners were in existence when they owned the title, a judgment or general lien is placed against the debtor’s real estate and acts as security
for any money owed under the judgment. A property can be sold to satisfy that judgment. Title insurance can protect the buyer from any legality in this instance, but the search (including all variations of a person’s name) must be exhaustively conducted.
A “tax search” will determine if any general real estate taxes have been levied against the property, determining if the taxes are current or past due. The tax search will also reveal any special assessments against the property and indicate if these are current or past due. An unpaid tax lien or special assessment takes precedent before
any other claims on a property.
A “report on possession” may also be compiled, supplementing the information gleaned from a title search to satisfy the law that says any real estate buyer is assumed to have notice of all the matters shown in the pubic records about the property, augmented by any information an actual inspection may reveal.
The buying and selling history of similar local properties (“comps”) may also be part of title company’s search services to aid buyers, developers and investors.
Once all searches have been completed, the title company will state the conditions under which it will insure the title and issue a “Commitment to Insure.” After clearing up any title defect uncovered in the title search, the buyer, seller and mortgage lender may proceed with the sale confidently.
More information about title searches may be found at www.alta.org