The house you buy will probably be the most highly valued asset you’ll ever own. It’s something you’ll want to protect with insurance, regular maintenance and repairs so it will appreciate in value over time.
Doing a title search on your new home before you take title to property is critical to protecting your home’s value. A title search is also the most cost efficient way to ensure your home is free and clear of liens. A thorough title search requires a trained abstractor to check the official land and court records to ensure there are no judgements and/or liens against your home. If there are liens, the time to have them removed is then; before you take title to the property.
If they aren’t removed and you take title to your home, there is a “cloud” on your title until the judgements and/or liens are removed. While there is a cloud on your title, it might be hard to borrow against or sell the property and the value itself may be in question. All of this can be prevented in most cases with a title search.
Why would someone buy a house without a thorough title search of the land and court records before closing on a home? There is an emerging model of automated underwriting in the title industry that seeks to reduce turn times by not including a thorough title search of the official land and court records needed to ensure that in most cases, all recorded liens against your property are not missed. Instead, this model relies on a lien status decision based on other data sources and machine learning.
Yes, the automated underwriting model does decrease the turn times for producing a title commitment for a purchase; but at what cost? According to Zillow, purchase transactions with a mortgage take an average of thirty to forty five days to close. For those few who are able to purchase with cash, it can take as little as seven business days to close. Normally, a title search for a purchase transaction can be completed in two to three business days which is well within the average time limits for mortgage and cash purchase transactions.
The average cost of a home in the US in 2021 is $408,800 according to Statista research. The average title search on a purchase transaction averages $200-$300; an incredible value and a tiny fraction of what your home is worth that provides the piece of mind of knowing there are no liens against your home. Mistakes and omissions can happen in title reports and is why all lenders require title insurance if you’re taking out a mortgage on a property.
Clearly, there are no shortcuts to knowing if there are liens against your property before you take title. Machine learning and other data sources are a “best guess” at what is actually in the official lien records. A title search is based on a search of the official lien records and is backed up by title insurance in the unlikely case of errors & omissions in a title report. Furthermore, a title search can be produced well within the average time frames required for a purchase transaction. With an average price point of $200-$300, title searches for purchase transactions are an incredible value for providing lien status on what may be your most highly valued asset.
Title searches remain the gold standard for knowing the status of liens on your property before you take title.