What are title searches and why do you need them?
Basically, a title search is a process where all the records related to the property you want to buy are checked and double-checked to make sure the person selling the property really owns it and that there aren't any other issues or charges on the property.
This is a big deal because if there are any problems with the title, it could affect the value or sale of the property. It’s a pretty complex process, but in the end, it can be the thing that validates whether the home you want to purchase is a dream house or a dud.
Who needs the title search reports and why?
When purchasing a property, especially an older home that may have changed hands a few times, it’s really important to conduct a title search to ensure no issues or charges are associated with the property. Many people involved in the buying process will use the title search report, including mortgage underwriters, title agents, real estate attorneys, lenders, asset management firms and, eventually, federal and state agencies.
And it’s not just needed in order to get a mortgage: a comprehensive title search report is essential for many financial transactions, including home improvement loans, preparation of a final commitment/title policy, closing home equity loans and various other purposes.
What does a title search reveal?
A title search can provide a wealth of information about a property and help identify potential issues or concerns that may affect the property's value or ownership.
Not only will it reveal the full legal name of the current owners, but it will also show how the title is held, such as whether it's held jointly or by tenants in-common. Plus, if applicable, it provides a comprehensive legal description of the property, including identification numbers, like block and lot numbers.
Here are a few other things that a title search can reveal:
- Bankruptcy Issues: A title search can also indicate if the property has been involved in any bankruptcy proceedings or if the owner has any outstanding debts that could affect the transfer of ownership.
- Contested Wills: If a previous owner has passed away and has a will that is being challenged, it could affect the transfer of ownership of the property.
- Divorce Decree: Were previous property owners affected by a past divorce? Was the property part of the settlement? This would be good to know before getting involved.
- Filing Errors: Misspelled names or incorrect legal descriptions can complicate a property transfer. Your title search will bring these to light so the seller can deal with them.
- Forgery: A title search can uncover any false documentation or forgery related to the property, such as fake deeds or mortgages.
- Mechanic's Liens: This is a legal claim placed on a property by a contractor who has not been paid for services — another headache you don’t want as a new property owner.
- Missing Heirs: What if rightful heirs or property owners have been omitted from previous title searches? This could affect the transfer of the property.
- Property Disputes: Boundaries may not be accurately represented, and disputes about encroachments or overlaps with neighboring properties could exist.
- Tax Liens: These are issues like unpaid property taxes, federal or state income taxes, business taxes and estate taxes that could be transferred to a new owner when a property is sold. Additionally, the seller may have lost a court case and have a judgment against them. You don’t want to be responsible for paying for these!
- Utility Easements: Planned construction, home improvement or landscaping projects on the property may impact the location of utility lines and the accessibility of utility companies to perform necessary maintenance or repairs. You’ll want to know about these easements before closing on the property.
Can I do a DIY title search?
While it's possible to do it without the help of a title company — the information is in the public record and available to anyone. However, the documents can include complicated legal language and tons of data that can be hard to sort through. Navigating it can be tricky and take a long time — even for a pro. And if you miss anything, it could cause problems with the sale of the property or even put your ownership in jeopardy later on.
That's why it's usually best to leave it to organizations with the right resources and skills to accurately find and analyze title records. As a result, the reports you get will be highly buttoned up and ready to help you move to the next phase of your property purchase.
Here is what a title search deliverable might include:
- Current Owner Search: This report provides a comprehensive analysis of the official deed copy held by the current owner, covering a minimum of two years. It involves a search for federal, state and municipal tax liens, a check for foreclosure status and a list of all settled and pending judgments. Additionally, it includes records of past and present mortgages.
- Date Down Endorsement: This report includes all postings between the last search date and the latest effective date.
- Full Search: This exhaustive search covers the current and prior owners of the property. It provides a detailed report on easement restrictions, covenants, active liens, past judgments, requirements and exceptions and anything else related to legal or extralegal transactions related to a property.
- Legal and Vesting Report: This report includes information about the property's address, tax status and other important details from the last deed.
- Mortgages and Deeds: This detailed report provides information about the assessed value of the property, open mortgages and related deeds.
- Two-Owner Search Report: This report includes the findings of the title search on the last two owners of the property. It can also include county assessment, active liens on the property, legal descriptions and judgments.
Does a title search catch everything?
Good question. That's where insurance comes in.
Even though title examiners do their best to identify and fix problems with the title before the purchase, there's always a possibility that something might slip through the cracks. Title insurance acts as a safety net for your property, protecting you and the lender from financial loss and legal expenses if any title issues bubble up after the deed transfer.
The best part? Unlike other types of insurance that you pay every month, title insurance only requires a one-time premium at closing. Read more about title insurance here.
Now you know!
While it may seem like an added step in the buying process, a title search can give you peace of mind and protect your investment in your new property. So, take some time to learn about title searches and title insurance. If you have any questions or want to know more, one of our friendly Movement Mortgage loan officers would be happy to chat with you.
And when you're ready to discuss financing, please don't hesitate to reach out! Find a loan officer near you.