Hands down, a “title search” is the part of the real estate transaction that we receive the most questions about from home buyers, particularly if this is a client’s first real estate purchase. You may have heard of having “title” to your house, your car, your motorcycle, but you may not know exactly what that means. What is title? Why do I acquire it? And what does it mean when it is “clear?” All very common questions.
Simply put, title to property is the proof of ownership of said property. A title search is an examination of the records concerning a property to ascertain the current ownership of the property and whether there are outstanding liens, judgments, foreclosure or bankruptcy proceedings and/or other encumbrances on the property that could impede the sale of marketable title to a purchaser. In a real estate transaction, where a seller is selling real property to the buyer, a title search will be ordered on behalf of the buyer of a property. In other scenarios, such as when financing is sought with the real property being used as the collateral (like in refinancing a loan), a lender may order a title search to identify any other liens, judgments, or “clouds” to title that could impact their willingness to extend financing and/or their priority on the collateral to satisfy their financing.
The title search consists of searches for information, such as:
- Current and past ownership of the property
- Any outstanding mortgages that must be paid off prior to closing
- Any outstanding taxes, fees, assessments, etc. due
- Foreclosure or bankruptcy proceedings that may impact the owner and/or property
- Unpaid child support obligations
- Any other judgments or liens that remain unsatisfied
- Easements, rights of way, or other restrictions placed upon the property
Once the title search is returned, the buyer’s attorney and/or title company will forward the conditions revealed by the title search that must be satisfied by the seller prior to the closing. If these conditions are satisfied, title insurance can be issued, and title can be transferred from one party to the next. One typical condition would be the existence of an open mortgage on a property. In that case, a seller must order a “payoff” statement to establish the amount of the net sale proceeds that must be paid in order to satisfy the open mortgage, thus allowing title to convey free and clear.
Shortly before the closing, the title company will perform a final “rundown” of title, which is an updated, contemporaneous search of the foregoing items to ensure that nothing new has arisen while the parties have been under contract and/or since the initial title commitment was issued. For example, if a seller surreptitiously open a home equity line of credit (“HELOC”) while the property is under contract, this final rundown of title could catch this to ensure that the HELOC is known – and satisfied – at the time of closing.
As an attorney, it is crucial to find a reputable, competent title company to engage in the title work necessary to bring a transaction to the closing table. For title searches, buyer’s attorneys will typically rely on the title work performed by the title company aligned with the industry standards to review the public records available on the property and with a high level of accuracy and sufficiency so as to satisfy the buyer’s due diligence in examining the title before closing. Laura and I believe it is crucial to work with a team of professionals that we trust, and building a solid relationship with a title company is part of this team building.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.
