When you and the seller enter into a real estate transaction, a title search must be made. Essentially, a title search determines whether the seller is legally allowed to sell the property to you. A title search also shows if the property has certain usage restrictions or existing liens. To answer these questions, a title search company, escrow company or your attorney will locate and review documents that pertain to the property, such as deeds, liens, judgments, levies, mortgages, name indexes, settlements, taxes and utility assessments. After completing a title search, the company or attorney will prepare a preliminary report. In total, the title search process can take up to several weeks.
Title Search Process
To thoroughly investigate a piece of property, the searcher must follow the chain of title, which shows the property's entire title transfer history. Depending on the jurisdiction of the property's location, the title chain search may be governed by the Marketable Title Act. This act outlines how far in the past the title chain must be traced. Typically, the minimum years required ranges from 40 to 60. In states that do not have this act, the searcher must research the chain of title to the property's original owner.
Another important component to a title search is looking for tax records, liens and judgments associated with the property. The searcher must determine the property's current tax status. Additionally, he can find out whether the land has any past or present special tax assessments, such as street light levies or sewer line installation. The searcher must also determine if any party has filed a lien against the property to secure a judgment.
Finally, a survey of the property may be conducted. During the survey, the inspector will check the lot size and the plot boundaries. He will also look for unrecorded easements and other encroachments that may cause an issue in determining the property's ownership.
In some cases, a title search may uncover clouds on the title. A clouded title means there could be a lien, ownership claim, clerical error or another issue that may prevent or delay you from closing on the house. Often, the title searcher can clear defects or remove liens before the closing date.
Occasionally, filing errors occur on the survey or deed. For instance, an owner's name may be indexed or spelled incorrectly, which can make it difficult to find a lien during the title search. Any errors found while in the process of a title search must be corrected before you close on the house. Title insurance can protect you against errors discovered after the closing.
Banks, financing companies, mechanics, homeowners' associations and government entities can put liens on properties in an attempt to recover unpaid debts. Even if a debt does not belong to you, it is possible to inherit the lien after the sale. However, title insurance can sometimes compensate you for title issues that crop up after closing.
Heirs and Wills
Unfortunately, many people do not have a will in place, or a will is not found during a title search. When a person with no apparent heir or will dies, the state can sell his assets. If an heir or will surfaces after you buy your home, the heir can contest the will, challenging your rights to the property.
Easements offer a person or entity partial or total access to a piece of land. Driveways and utility paths are two examples of an easement. Although you may be purchasing a house and the land on which it sits, an unknown easement may restrict you from using the entire property.
Since more than one survey may be conducted for the same property throughout the years, it is normal for a title search to find multiple survey records. The boundaries shown on one survey may vary from those on another survey. Therefore, another party may have an ownership claim to some of your property.
Forgeries and Illegalities
Illegal acts that are tied to your property's title history can compromise your ownership of the property. Examples of illegal title history acts include documents that are forged or signed by a minor. In some cases, forged documents can result in an illegal home sale or illegal ownership transfer.