The title search process is one of the most important parts of obtaining title insurance for homeowners. It is also one of the parts of buying a home which real estate agents, home buyers, loan officers and mortgage brokers often know the least about.
The title search process is one of the most important parts of obtaining title insurance for homeowners. It is also one of the parts of buying a home which real estate agents, home buyers, loan officers and mortgage brokers often know the least about. The more you understand it, the easier the closing process is, and the more appreciation everyone in the transaction has for how it protects them, their buyers, sellers,and assets.
Whether you need a lender’s title insurance policy, owners’ policy, or both, or you just want to make sure a property has clear title before starting the sales and purchase process, it all begins with a search of the public records.
Searching the Public Records
An in-depth title search is generally comprised of a thorough examination of public records, made up of three different types of information: personal, tax and property information. Searching the public records provides a basis for title insurance and usually includes visits to the offices of recorders or registers of deeds, clerks of courts and other officials. Title researchers look in the records to find out:
To make things more complicated, in many jurisdictions, information about a piece of property and any liens against it may be filed in different ways. They can be filed under the seller’s name, the owner’s name, by lot number or by street address. To make the search process less cumbersome, many title companies have created title plants, which contain virtually the same information as the county records, but are indexed in a consistent manner (i.e. by name or lot number) so that title searches may be performed more quickly and accurately.
Abstract of Title
Once the search of the public records has been completed, a title company can produce the abstract of title and title underwriters can really begin their work.
The abstract of title and chain of title lay out the history of property ownership and transactions, and any encumbrances on the property. This way ownership can be tracked to the current seller, so the buyer and title insurer know the seller on the contract really has the legal right to sell.
These documents also layout out any liens or easements and restrictions, and define exactly what is being transferred in terms of property and rights. For example, you want to know if you really own the waterfront part of a waterfront property. Or whether you have the right to build on it. Or whether someone else may hold legal rights or claims to part ownership. You also need to know what debt is attached to the property. You want all of that paid off before closing, or you will be responsible for paying it above and beyond your purchase price.
Note that another home title search is typically performed right before closing, to ensure that the seller hasn’t attached new debt to the property, or sold off any rights before you actually pay them and take possession. This is a common risk that can surface during the title and closing process.
The title underwriters will then issue a title commitment. This document sets out how much coverage there is, the terms of the policy, any exclusions, or items which need to be resolved. A mortgage lender won’t close without a title commitment.
When there are issues, a great title company will shine by taking care of them. They’ll let you know if there are ‘clouds’ on title, or debts that need to be solved. Often they will help hunt down other previous owners to get their sign off on the sale, will help negotiate liens, and clear mixed up paperwork and records so that the new buyer can get insurance and enjoy the peace of mind of owning their home.
The Title Insurance Policy
The actual title insurance policy doesn’t go into effect until after the deed transfer has been signed and the policy premium is paid, which all happens on closing day. You will then receive a copy of your policy, which typically comes in the mail after closing. While you may have already stacked up mountains of paper in the purchase process, this is a very important document. It is what insures your investment, ownership and legal rights. Keep a physical copy of the title insurance policy in a safe place, and back it up with one or two online copies in the cloud so it can never be lost, no matter what happens.
There’s a lot more to a property title search and getting title insurance than most realize. Fortunately, you’ll have a whole team of title experts conducting these searches for you, checking the details, negotiating issues and clearing them, and working to protect your interests. You may not need to know everything about title, surveying, liens and building codes to buy a home, but do know that there is a ton of work involved behind the scenes in order to facilitate a safe transaction. So, don’t forego this vital insurance policy!