|
Consumer Information
|
|
What's in a Title Search?
|
You've decided to purchase a home and hope to take possession as soon as
possible. The terms have been agreed upon and all the financial
arrangements have been made. But there's one important detail remaining.
Before the transaction can close, a title search must be made.
The most accurate description of title is a bundle of rights in real
property. A title search is the process of determining from the public
record just what these rights are and who owns them.
A title search is a means of determining that the person who is selling
the property really has the right to sell it, and that the buyer is
getting all the rights to the property (title) that he or she is paying
for.
The search process can be undertaken by the title company in those
jurisdictions where the company maintains offices. In some areas,
however, searches are made only by practicing attorneys. However the
search is performed, in most real estate transactions today a title
insurance policy is purchased to assure the buyer that he or she has
purchased a valid title.
In those transactions where title insurance is involved, the title
company must determine insurability of the title as part of the search
process. This leads to the issuance of a title policy, which insures the
existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the title
and will pay losses within the coverage of the policy if they occur.
But what exactly, is involved in a title search? The Chicago Title and Trust
Family of Companies provides the following step-by-step review:
Chain of Title
This is simply a history of the ownership of a particular piece of
property, telling who bought it and sold it, and when. The information
may be derived from public records usually a County Clerk's or Recorder's
Office or obtained from title plants privately owned and maintained by
title companies. There are great varieties of such plants index cards,
punch cards, tract books, even sophisticated computerized plants. However,
they all contain essentially the same information from which the history
of the title may be secured.
Tax Search
This is a search to determine the present status of general real estate
taxes against the property. The tax search will reveal if taxes are
current or whether any taxes are past due and unpaid from previous years.
In addition, the tax search will indicate the existence of any special
assessments against the land and, if so, whether or not these assessments
are current or past due.
A due and unpaid tax or special assessment is a prior lien or claim on
the property above all others. If a buyer purchases property with unpaid
and past due taxes or assessments against it, he or she is likely to find
a government body the village, county or state placing the property up for
sale to pay those taxes or assessments. A tax search reveals the status of
the taxes. Title insurance protects the buyer against loss from unpaid and
past due taxes and assessments.
Report on Possession
In many places where it operates, the CTIC Family sends inspectors to look
at the property to verify the lot size, check the location of improvements,
look for evidence of easements that are not shown of record and check on
who is living there.
The purpose of this is to supplement the information learned from the
title search. In the eyes of the law, any buyer of real estate is assumed
to have notice of all matters properly shown in the public records as to
that real estate as well as any information that an actual inspection may
reveal.
If the inspector detects an unrecorded easement or other evidence of
outstanding rights that could affect the owner's title and possibly the
value and intended use, the company tells the buyer of these things before
he or she closes the purchase. Those matters must then either be disposed
of or shown as exceptions in the title insurance policy. Sometimes when an
acceptable survey and appropriate affidavits are received, an inspection
will not be made.
Judgment and Name Search
One of the most important parts of the title search is to determine if
there are any unsatisfied judgments against the seller or previous owners
which were in existence while they owned the title. A judgment is a
general lien against the debtor's real estate and constitutes security
for any money owed under the judgment. The real estate can be sold to
satisfy the judgment.
It is extremely important to be sure that a title is not subject to
judgments against the seller or previous owners. Title insurance provides
this protection. A judgment against a person named Smith may affect the
title of a seller named Smith, depending on whether or not they are the
same person. So all possible variations of the name must be examined.
For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt,
Schmidz, Schmied, Schmiedt, Smid, Smythe, and so on. The name Nichols can
be spelled 73 different ways, from Nachols to Nychals. The task is to
determine which of these applies to the owner in question. First names
have to be checked, too. There are 25 foreign forms of John, including
Johann, Jehan, Hans, Shaun, Gudi, and Efom.
Rights established by judgment decrees, unpaid federal income taxes, and
mechanic's liens all may be prior claims on the property, ahead of the
buyer's or lender's rights. If a judgment is discovered that constitutes
a defect in the title, it is pointed out, and the seller must then
eliminate it before the title of the new buyer can be insured free and
clear of that judgment.
Commitment
When these searches have been completed, the title company issues a
commitment to insure, stating the conditions under which it will insure
the title. The buyer and seller and the mortgage lender can proceed with
the closing of the transaction after clearing up any defects in the title
which may have been uncovered by the search and examination.
The mortgage lender is as concerned as the buyer about the quality of the
title because the property is to be security for the new mortgage loan.
The mortgage lender requires assurance that it has a valid first (or
another acceptable priority) mortgage lien on the property. This is not
only common sense, but generally is a legal requirement of regulated
mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of
the property. Although the land is the same, the interest of the buyer and
the interest of the lender are very different. The provisions of a
lender's title insurance policy are very different from those of a
buyer's policy, so the buyer should obtain his own policy, often issued
simultaneously with the lender's policy.
|
|
|