Whether you’re about to buy or sell a property, a title search is a critical aspect of the process. Even if every other stage of the closing process is completed without issue, a problem with the title could make it difficult to close on the sale of the home. Conducting a title search will give you peace of mind that there won’t be any surprising ownership disputes or liens that need to be dealt with. The following offers a more in-depth look at title searches and why they’re needed during any real estate transaction.
What Is a Title Search?
When going through with the purchase or sale of a home, many people assume that the home can be sold without issue. The truth, however, is that there can be liens or claims on the property that must be handled before the transaction can be closed. If these issues aren’t resolved, the new owner would need to contend with them. Lenders won’t finalize a loan until a title search has taken place.
A property title search looks through all public records on a property to determine who the rightful legal owner is. This search will also reveal other claims that might have been made on the property over the years. During the title search, contracts, deeds, and other papers will be examined to determine if any defects are present on the deed. If the property has encountered a zoning violation, this violation will be present in the title if it wasn’t previously handled.
If you’re buying a home, you want to be certain that you receive a clear title that won’t open you up to future legal issues. Requesting a title search online is the easiest way to determine if the title for the home you’re interested in is clean. If you’re getting ready to sell your property, you might want to run a title search before listing your property to make sure that all potential issues have been resolved.
Why You Need a Title Search
Finding out exactly who owns a property that you want to buy is the most important aspect of obtaining a title search. Keep in mind, however, that the existing owner might not know about an old claim that’s present on the title. You should also know that any liens that are found on a title will need to be resolved before the sale is finalized if you don’t want to encounter long-term issues with your ownership claim. Even a partial ownership claim could substantially devalue your investment.
While liens can be minor financial issues, you would be tasked with paying them since liens and all other debts on the title follow the property as opposed to the owner. The most common encumbrances that are present on a title include homeowners association (HOA) fees, home improvement bills, and unpaid property taxes. If you don’t request a title search, you might become responsible for these expenses.
There are many issues that can be identified during a title search, the primary of which include:
- An easement that alters the use of the property
- A break that’s found in the chain of title, which means that someone who didn’t actually own the property conveyed it
- Creditor, tax, or mechanical liens
- A bankruptcy that the current owner has had, which leads to unclear ownership
- Town zoning ordinances that prevent you from being able to use the house like you want to
- A scenario where someone aside from the owner lives in the property and would claim ownership in the event that the owner died
- Existence of multiple mortgages on the property, all of which need to be paid before the sale goes through
- Building code violations
- Ongoing divorce proceedings that could result in a spouse contesting the property transfer
- A current or pending foreclosure
- Judgments that have been made against the owner and might result in liens
- Claims by neighbors that they own a portion of the land
- Local permits that might make the title less clear or prevent a clear title from being made
You can inquire with a real estate attorney if you’re unsure about what happens if encumbrances remain after you purchase the property. You should also find out what needs to be done to resolve issues on a title if you’re getting ready to list your home on the market.
As mentioned previously, lenders require a title search before they’ll provide borrowers with loans. If an ownership claim or discrepancy is found during the title search, you would be tasked with resolving this issue before the closing process could continue. At this point, the buyer may decide to back out of the sale if they don’t want to wait, which is why it’s highly recommended that you perform a title search before the borrower’s lender requests one.
Who Performs a Title Search?
Attorneys or title companies take care of title searches. You could also choose to perform this process online by requesting all title search documents for a small fee. If you perform this process on your own, you’ll need to know how to discern various legal documents. If you’ve hired an attorney to help you get through the real estate transaction, they would likely be able to assist you with understanding the title search and any problems that are discovered.
How Long a Title Search Takes
The amount of time it takes to perform a title search largely depends on how complex the documents are. More liens on the property means that the title search will likely take longer. In the event that a record-holding office is slow to respond, the title search wouldn’t be complete until these documents are provided, which means that numerous delays are possible.
Once all of the documents are available, it can take anywhere from several hours to several weeks to perform a thorough examination of the documents to look for outstanding claims. The average duration for a title search is one-to-two weeks.
There are also some differences depending on the age of the home. A newer home almost always has less documents to search through, which means that the title search process should be quicker. On the other hand, older homes may have extensive records, all of which would need to be reviewed before the process could continue.
While waiting for the results of the title search can be frustrating, a longer wait makes it much more likely that any issues pertaining to ownership claims or liens will be caught before the sale is finalized.
A title search should always occur before a property is bought or sold. As a buyer, you don’t want to purchase a home if you would be tasked with paying for outstanding liens or debts that weren’t caught because a thorough title search wasn’t performed. If you’re selling your home, you should be confident that a clean title will be produced when the borrower’s lender orders a title search. If an issue arises, you can take steps to resolve them early on in the home-selling process.