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A property title search, which can uncover legal or financial entanglements with a piece of real estate, is advisable with any home purchase and typically required if you're financing the deal. That's because they protect both buyers and their lenders, as liens on a home or other outstanding title issues need to be addressed during real estate transactions.
Here's what a property title search entails, and how the process works.
What Is a Title Search?
A title search uses public records to document the chain of ownership on a piece of real estate, identifying who bought and sold the property over the course of its existence. Its goals include:
- Ensuring that the party offering the property for sale has the legal right to sell it.
- Revealing the existence of any covenants that limit the use of the property or easements that allow use of the property without the owner's permission. These may apply to owners of adjacent parcels that don't have road access, or to utility companies requiring occasional access to cables or pipes. (There may be little you can do about valid easements, but you should know about them when buying a property.)
- Identifying any court judgments, tax obligations or other legal or financial "defects" attached to the property through past owners—which could become your problem if the responsible owner does not address them before the sale.
Why Conduct a Title Search?
The primary justification for property title searches—and why mortgage lenders tend to require them—is to ensure a property is free of liens, which are legal claims against the property connected with outstanding debts, taxes or other financial obligations. When a property is sold, the proceeds must be used to pay off valid liens. The obligation typically rests with the seller in a real estate deal, but a lien attached to the property that's not apparent at the time of sale could be transferred to you, the new owner.
Put another way, the real cost of the home to you could be the purchase price plus the amounts of any liens you unwittingly assume with it. A property title search prevents such surprises.
Forgery and fraud certainly can occur, but when property title searches turn up title defects, they are often innocent mistakes. Some liens persist despite fulfillment of the underlying financial obligation, due to failure of the lienholder to report satisfaction of the debt or errors by courts or municipal clerks. These can often be easily cleared up but must be taken care of before most lenders will give final loan approval.
Potentially more complicated are cases in which a seller who inherited a house was unaware of a lien incurred one or more generations ago, and which must be settled in the course of the property sale.
What Can a Property Title Search Reveal?
Dozens of legal processes can attach liens to a property, and a thorough property title search will ferret out any and all that apply. Here are some of the more common types of liens that could turn up:
- Mechanic's lien: If you have major construction on your home, it's common for the contractor to file a mechanic's lien, which places a claim against the house to protect them against loss of labor and materials costs if you fail to pay them. Once you pay for the job, the contractor is supposed to have the lien lifted, but that doesn't always happen. Mechanic's liens also typically have built-in expiration dates, but selling a property before then can gum up the sale.
- Tax lien: Municipalities and other taxing jurisdictions such as school, fire, sewer and water districts all typically have the authority to impose liens against homes whose owners fail to keep up their property taxes.
- Delinquent homeowner fees: If a home or condominium is governed by a homeowners association, the association can attach a lien to the property to secure unpaid dues or fees. These must typically be settled in the course of the sale.
- Spousal or child support lien: If a parent fails to pay court-ordered child support or spousal support, the court can file a lien against the delinquent party.
- Civil judgment: Parties awarded compensatory or punitive damages in civil lawsuits may file claims against real estate and other property owned by the opposing party.
How to Conduct a Title Search
If you're financing a house with a mortgage, your lender will likely require you to commission a property title search from a professional service provider, or abstractor, whose fee is typically included in your closing costs. (Title search fees typically cost $75 to $200, depending on the going rate for your locale and the complexity of the required search.) That's not a lot of money when you consider the cost of a home and the potential cost of undisclosed title defects, so it may be wise to leave the job to the pros.
But since property title searches are based on public records, anyone can conduct one. Here's how to go about it:
- Identify the municipality that keeps property records for the address in question. In most areas, it's the county government, but in some locations these records are kept by the state, city or town in which the property is located.
- Determine whether property records are available online. Many municipalities have been recording transactions digitally for decades, and many are scanning older records so they can be searched online. If the property in question was built in the digital-records era, its entire title history may be available digitally. For older properties, or in locations where digital record keeping isn't available, it may be necessary to review hard-copy records and request copies of relevant documents.
- Find the property's most recent title deed. Typically, this is done by looking it up under the name of the current owner. In cases where a property is owned by a trust or corporation, search using the full legal name of the entity.
- Review the title. Be sure to note its date, the name of the grantor (the seller who transferred the deed to the current owner, the grantee) and any descriptions of easements or of liens attached to the title. The formatting of deed documents isn't standardized, so it may take effort to grasp the structure and flow of the document. The grantor and grantee are typically named in the opening section, and signatures of both parties typically appear at the end of the deed.
- Search local court and tax records. Look under the name of the current owner to check for outstanding court judgments or tax liens that affect the property. Get copies of all relevant documents.
- Repeat the process. This time, look up the name of the grantor named in the previous deed. Find the title deed in which they are listed as grantee. Once again, note the date and the grantor, any relevant descriptions of liens and easements, and again check court and tax records for judgments against that grantee.
- Work your way back to the original owner of the property. If there are any gaps in the date record, or if names don't match up from one deed to the next, there may be complications in the property's history. In this case, you'd be wise to consult a professional abstractor, who's familiar with local record-keeping practices and can help fill in the missing information.
The Bottom Line
The potential for title defects to delay or scuttle your real estate purchase, or to saddle you with a house that has outstanding legal claims against it, makes a property title search essential. Your mortgage lender will require it and the peace of mind it will bring will likely make the process, and the fee, worthwhile. If you're considering making a home purchase, you can also gain peace of mind by checking your Experian credit report and your free credit score to get an idea how favorably lenders will view your creditworthiness.