Purchasing A Home: A Guide to Title Search & Title Insurance
Buying a home is one of the most important financial decisions you will make in your lifetime. It can be an exciting and life-changing experience. Also, a decision that requires careful consideration. That’s why it’s important to understand everything there is to know about purchasing a home, including what goes into a title search and how it can protect you from potential disasters.
What Is A Title Search?
A title search is an important step in securing a home. It verifies that you are buying what you think you’re buying and that it’s not owned by someone else. It also ensures there aren’t any liens or encumbrances on the property, like unpaid taxes. A title search can help ensure you don’t buy a property with hidden issues like these, which could make it harder to resell when it’s time to move on.
What Will The Title Search Reveal?
A title search will tell you the status of the property in question, including any liens or encumbrances that exist against the home and whether any existing claims or lawsuits are pending. Also, it will show if there are any zoning violations that may affect your title in some way (like an unresolved violation from when the house was constructed).
What are the types of errors that could be found during a title search?
Chain of title
An error in the order of ownership stemming from a misrecorded deed. For example, if a piece of land was purchased by Jane Doe, who then sold to John Smith and then died without having her will recorded with the county clerk’s office, it could be difficult for anyone else to obtain the property because there is no legally documented way for them to verify that Jane sold the land before she passed away.
Errors in the land description can occur when someone buys or sells real estate without knowing its exact location. In this case, if you purchased one square mile of land thinking it was another square mile owned by someone else and they wanted their own back again (or vice versa), neither party would know where exactly they were looking for their respective piece(s) of property.
Error in recording can also lead to problems down the road if not corrected immediately after purchase. If your deed doesn’t reflect all necessary information—such as an incorrect address or inaccurate description—you may find yourself unable to access vital documents later on when needed most.
What happens if there’s a problem with the title?
If there are problems with your title, they will be revealed during your title search. You’ll want to review these findings carefully before moving forward with your purchase. Problems with the title could result in delays or even complete cancellation of your closing date if it’s determined that the seller cannot transfer a clear title to you. This can also result in additional fees being tacked onto your closing costs, which could put an unnecessary strain on your finances at a time when you should be focusing on preparing for homeownership instead of worrying about added expenses.
But don’t let the problems with the title discourage you. For instance, if you find a property with delinquent taxes, you can read Buying a Property with Delinquent Taxes to learn how to get this problem fixed!
How often should I get a title search done?
Because the value of your home is directly related to its title, it’s important to have a thorough and current title search done at least once a year. You can also opt for more frequent reports if you’re concerned about activity on your street or in your neighborhood. If you live in an area where many foreclosures or other distressed properties are being auctioned off by banks or other lenders, it may be wise to get your title checked every six months instead of annually.
Can I check my home’s title on my own?
Doing some research on the history of the property is important, but searching for your own title can be risky. It requires a thorough understanding of the law, and extensive knowledge of real estate transactions to interpret the results accurately. The information contained in a deed or other recorded documents may be confusing and difficult to interpret without professional help. In addition, there may be documents that were never recorded with your county’s deed office but are still part of your property’s history. So even though the answer is “yes”, it’s highly recommended to have a professional do it.
How do I choose a title company?
When choosing a title company, you should look for one that is licensed in your state and has a good reputation in the community. A title company should be well-respected by realtors and other members of the industry.
When you’re looking at competing quotes from different title companies, make sure you’re comparing apples to apples:
- Are they all using comparable price points?
- Do they offer similar services?
- Look closely at how much each service costs, such as
- conducting an abstract search ($50-$75)
- preparing an owner’s policy (between $250-$500)
- issuing a duplicate original certificate ($25-$50)
- producing a land record copy ($10-$20).
These fees will vary depending on how busy your local county office is. So to save you time and money, it’s important to talk with several agents before deciding on one. First American Title offers a title quote calculator to get a free estimate.
What Is Title Insurance?
In contrast to title searching, which entails checking the public records for any issues or liens that may affect your ability to transfer property ownership, title insurance protects the buyer, seller, and lender against potential losses associated with undisclosed matters affecting your land’s deed.
Where To Buy Title Insurance?
If you want to be sure that you are buying a home with a clear title and not one that is encumbered by any claims or liens, then it’s best to purchase a title insurance policy from an independent agency. In addition, if the seller will not agree to obtain title insurance for their protection, it is usually possible for the buyer to obtain a separate policy.
There are four main types of service providers who can provide title insurance: real estate agents, attorneys, escrow companies, and traditional title companies (also called abstractors). The first three may provide either full-service or limited-scope services (depending on where they operate). Traditional companies typically offer full-service policies only.
What are the different types of title insurance?
Lender’s Title Insurance
Lender’s title insurance protects lenders against losses that may result if a loan is not repaid as scheduled or if it turns out that the property has a defect that makes it impossible to sell or refinance the loan. When you apply for a mortgage, your lender will require you to obtain a lender’s title insurance on any real estate you purchase with the loan.
Owner’s Title Insurance
Owner’s title insurance protects an owner from loss resulting from errors or omissions in recorded documents affecting their ownership rights. For example, if you purchase real estate from a seller who doesn’t have a clear title to it, you may face problems when trying to sell or refinance your ownership interest. This type of policy also protects against losses that may result from environmental hazards on or near your property.
Examples of problems that could occur would be…
Incorrect recording of documents affecting title
If a person files an affidavit claiming ownership of your home and has it recorded in error, that could cause problems with your ability to sell or refinance your home.
This refers to any unlawful transfer made without legal authority, such as
- Sales made by creditors after foreclosure proceedings have been filed against you.
- Deeds given by minors who cannot legally own property.
- Deeds given by mentally incompetent people who don’t know what they are doing.
- Conveyance of land taken illegally from its rightful owner.
- Use of forged documents for transfer purposes.
- Use of unauthorized signatures on any document affecting title.
Unauthorized liens or encumbrances
If someone places a lien on your home without permission (for example, if they fail to pay off their auto loan at the bank), then this action could affect your ability to sell or refinance your home.
Title insurance and title search both go hand-in-hand.
When you purchase a home, the lender requires that you buy title insurance as part of the closing costs because it protects against losses that may occur due to defects in the title.
A title search is prepared by an attorney on behalf of your lender. It’s their responsibility to ensure that there are no property liens or other issues affecting your ability to take ownership of your new property before agreeing to lend money for its purchase.
The report from this search will contain information about any outstanding mortgages, easements or restrictions on the land, recordation of deeds, and other pertinent documentation related to previous ownerships over time (including liens).
If you are nervous, you are not alone. There are many potential pitfalls awaiting the unwary home purchaser. However, a title search and title insurance guide can help to ensure your peace of mind during this exciting period in your life. We hope that this article has been a helpful introduction to the world of title searches. Remember you can always count on experts like us when you have any questions. With some information and practice, obtaining a title search and getting title insurance will be as easy as riding a bicycle—well almost!
Adam Smith has spent the last 5 years in the Private Money Lending world helping real estate investors secure financing for their non-owner occupied real estate investments. When he’s not thinking about real estate, Adam is an avid Jazz music fan and fisherman.