A
title search is a process that is performed primarily to determine the answer to three questions:
- Does the seller have a salable interest in the property?
- What kind of restrictions or allowances pertain to the use of the land (real covenants, easements, or other servitude's)?
- Do any liens exist on the property which need to be paid off at closing (mortgage
A mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt...
s, back taxes, mechanic's liens, or other assessments)?
Anyone may do a title search and documents concerning conveyances of land are a matter of public record.
A
title search is a process that is performed primarily to determine the answer to three questions:
- Does the seller have a salable interest in the property?
- What kind of restrictions or allowances pertain to the use of the land (real covenants, easements, or other servitude's)?
- Do any liens exist on the property which need to be paid off at closing (mortgage
A mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt...
s, back taxes, mechanic's liens, or other assessments)?
Anyone may do a title search and documents concerning conveyances of land are a matter of public record. However, it is often the case that people choose to contact a title company or attorney to conduct an exhaustive title search. For example, a title report may also show any easements, or recorded legal rights to the property or portions of the property. A previous owner may have legally given a neighbor the right to share the driveway, or the city may have a right to strips of the property for putting power lines, communication lines, water pipes, or sewer pipes. A few on-line services, such as HomeInfoMax.com offer title searches for relatively little cost, and their accuracy is not inferior to what a title company or attorney will offer; however on-line businesses rely mostly on electronically available information, and for that reason could at times be limited.
In the United States, the buyer of a property will usually purchase
title insuranceTitle insurance in the United States is indemnity insurance against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Title insurance is principally a product developed and sold in the United States as a result of the comparative...
, which protects the buyer from any title problems that may arise after sale (such as liens that were missed during the title search). The title insurance company issues a report and issues an insurance policy in support of its findings. However, title searches are most often carried out before contracting is completed between parties and sometimes during the
escrowAn escrow account is
*an account established by a broker, under the provisions of license law, for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction, or...
phase of a closing.
A title search is also performed when an owner of a certain real property wishes to mortgage his property and the bank requires from owner to insure their transaction.
Generally, there are two main types of title searching, a full coverage search and limited coverage search; other types include non-insured reports and foreclosure guarantee search.
Full coverage search
A full coverage search is usually done when creating a title report for sale/resale transactions and for transaction that involves
construction loanIn the broadest sense of the term, a construction loan is any loan where the proceeds are used to finance construction of some kind. In the United States Financial Services industry however, the term is used to describe a genre of loans designed for construction and containing features such as...
s. It generally includes searches related to property lien,
easementAn easement is a non-possessory interest to use real property in possession of another person for a stated purpose. An easement is considered as a property right in itself at common law and is still treated as a type of property in most jurisdictions...
s,
CC&RsCC&Rs is real estate acronym which stands for Covenants, Conditions, and Restrictions . Often regarded as classic legal boilerplate, CC&Rs variously regulate the usages and aesthetics of a neighborhood or development to a greater or lesser degree....
covenants, conditions and restrictionsA real covenant is a legal obligation imposed in a deed by the seller upon the buyer of real estate to do or not to do something. Such restrictions frequently "run with the land" and are enforceable on subsequent buyers of the property...
,
agreementAgreement may refer to:* Agreement or concord, cross-reference between parts of a phrase* Gentlemen's agreement, not enforceable by law* Contract, enforceable in a court of law...
s,
resolutionResolution may refer to:* Resolution , a rule of inference used for automated theorem proving* Resolution , a written motion adopted by a deliberative body* Resolution , a technique in music theory...
s and ordinances that will affect the
real propertyIn the common law, real property refers to one of the two main classes of property, the other being personal property. Real property generally encompasses land, land improvements resulting from human effort including buildings and machinery sited on land, and various property rights over the...
in question.
- Search for liens against the owner and the other parties on title.
- Search for liens against the buyer (for sale transactions only).
- Search for Bankruptcy
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor in an effort to recoup a portion of what they are owed or initiate a restructuring...
proceedings against the owner of the property.
- Search for liens against the buyer is not something that is covered in a title search.
Limited coverage search
A limited coverage search is usually done when making title reports for refinance transactions that involves
ownership equityEquity, in finance and accounting, is the residual claim or interest of the most junior class of investors in an asset, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists...
loans and for making simple title guarantee reports.
This kind of title searching usually includes searches for property liens, liens against the owner and the other parties on title and search for
bankruptcyBankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor in an effort to recoup a portion of what they are owed or initiate a restructuring...
proceedings against the owner of the property.
Non-insured reports
There are a variety of title searches which provide the customer with a report, but no insurance. These are for informational purposes only, and are called by a variety of names, such as Lot Book Report, Plat Certificate, 300-foot Radius Report, and others. These informational searches are used mainly in two instances:
- Probate
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A surrogate court decides the validity of a testator's will...
. This is when a family, lawyer, or court is dividing up the property of a deceased person. Heirs will want to know what liens they are taking on and who has rights to the land.
- Subdividing
Subdivision is the act of dividing land into pieces that are easier to sell or otherwise develop, usually via a plat. The former single piece as a whole is then known as a subdivision in the United States...
. To create a subdivision, a person takes land previously platted (legally named and recorded) under another name and renames and re plats it as a new development or subdivision. A report must be given to the city, showing taxes paid and no liens. The owner can then sell the lots individually or en mass, and may record Covenants, Conditions, and Restrictions, which govern how residents may construct their houses or yards, and may limit other activities. Many subdivisions have noise, pet, and trash laws as well.
Foreclosure guarantee search
A foreclosure guarantee is a type of report (e.g. trustees sale guarantee, judicial foreclosure guarantee and litigation guarantee) that is used mainly for foreclosing an encumbrances (or a lien) in a certain property. The title searcher will perform a full coverage search to the property in default and a search for the addresses of the lien holders to the property in default. The addresses will be used for sending copies of the notice of foreclosure letters (such as notice of trustees sale, etc.) to the lien holders to the property in default.
Property Title Search before Foreclosure Sale
Let’s first understand how the property happened to be in foreclosure. A common reason is that current owners did not pay their mortgage or tax bills on-time, causing bank or municipal/state/federal government to place a lien against the property, in other words, the mortgage lender or government wants to get payment on the current owner’s obligations by any means, even if they have to go through the foreclosure expense and auction the house to recover the owed amount or gain possession of the house to sell it latest via real estate agency (REO properties).
If the current property owner had a single lender, then the amount you see at the foreclosure auction might be the only debt against this property (key word is might). In the case where the current owner had, say, a home equity loan in addition to home mortgage(s), there may be two or more liens against the property from different mortgage lenders. Whichever lender files “notice of default” first and puts a lien against the property gets to foreclose on the property first. The payout from foreclosure action to lenders or government always happens in order of court filing. The only way for you, as an investor, to find out what liens, mortgages, debts exist against the property is to order a Property Title search.
Foreclosure auctions (sometimes called sheriff’s sale) are typically held in the municipal (county) courts. The County does not offer you any protection against additional liens on the property, nor do they guarantee you a clean title.
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