As a real estate agent, you will be responsible for explaining the home-buying and selling process to your clients. A title search is part of that process. What is a title search in real estate? We’ll explain the function of a title and what it means to perform a title search.
What Is a Property Title Search?
A title is a legal document confirming a person’s property ownership. It is sometimes confused with a “deed.” Learn how these two important documents differ by reading Property Deed vs Property Title: Key Differences.
A property title search in real estate is an in-depth examination of public records of a property’s history. The purpose of a title search is to verify the legal ownership of the property and identify any claims, liens, or encumbrances that could affect the transfer of ownership to the buyer. Essentially, the process ensures the seller has the legal right to sell the property.
Who Performs a Property Title Search?
Typically, a title company reviews public records to verify the legal ownership of a property and uncover any claims, liens, or encumbrances. The title company ensures the property’s title is clear so that no legal obstacles could prohibit the transfer of ownership to the buyer.
What Is Included in a Title Search Report?
What can you expect from a title search report? Here are the details that are included in the document:
1. Property description
A property description provides a detailed legal outline of the property’s physical location. It may include the property’s lot number, block number, and any relevant information about its location. This description is crucial, as it helps prevent disputes and confusion over property boundaries and ownership.
2. Ownership history
The title search report details all the previous owners of the property. This historical overview includes information on past transfers, dates of ownership, and any legal actions affecting the ownership. Examining the property’s history can address potential issues like unresolved or conflicting ownership claims.
3. Encumbrances
Encumbrances in title search reports refer to any claims, liens, easements, or restrictions on the property that might affect its use or transfer. Mortgages are typical encumbrances listed in a title report. Unpaid property taxes or utility rights-of-way may also be included.
4. Restrictions and covenants
The title search report will also outline specific limitations and rules governing the property’s use, such as zoning laws, building restrictions, and homeowner association regulations. These legal conditions may impact how a property can be developed or used.
5. Legal proceedings
What legal proceedings may affect property ownership? The “legal proceedings section details any ongoing or past legal actions involving the property. This includes lawsuits, foreclosures, and disputes that could affect ownership or transfer. Identifying these issues is crucial to ensure that property ownership can be transferred.
6. Taxes and assessments
This section of the title report outlines outstanding property taxes, special assessments, or municipal charges. It ensures that all taxes are current and identifies any liens resulting from unpaid taxes.
Related Article: What Is Property Tax? How Is it Calculated in the U.S.?
How Much Does a Title Search Cost?
The cost of a title search ranges from $75 to $250, depending on the area, the complexity of the property’s history, and the volume of historical records. The title search fee is part of the overall closing costs in a real estate transaction.
In many cases, the buyer covers the cost of the title search to ensure the property’s title is clear. However, sometimes, the seller may agree to pay the fee as part of the negotiated agreement.
Related Article: What Is Closing in Real Estate? What to Expect During the Closing Process
Why Are Property Title Searches Important?
It’s expensive to move! You might feel inclined to skip the title search to save money. However, your mortgage lender may require one as part of the underwriting process. Here are some additional reasons a property title search is critical.
1. Confirm ownership
When a buyer purchases a property, they assume the seller has the legal right to sell it. A title search confirms this fact. This thorough examination ensures the title is clear, preventing any surprises or disputes over ownership.
2. Identify liens
Liens and encumbrances can significantly impact a property’s value and transferability. A title search reveals any outstanding debts, such as mortgages, unpaid taxes, or contractor liens, that are attached to the property.
3. Ensure clear title
The central reason for a title search is to ensure a clear title. Skipping this step may result in the new owner having to pay unpaid property taxes, HOA fees, or bills for home improvements.
4. Prevent legal issues
We know it sounds like a nightmare scenario, but what if a scammer steals the identity of a property owner to steal a large sum of money? What if, months after moving, the new owner discovers that the previous owner didn’t have a legal right to the property because someone in an earlier generation willed it to another person? These nightmare legal issues are possible but are less likely when a title search is completed.
5. Facilitate financing
Your mortgage company has a stake in the property. After all, it will retain ownership if you stop paying your mortgage. For that reason, most mortgage lenders require a title search – and title insurance.
How Long Does a Title Search Take?
A title search takes anywhere from a few days to a few weeks, depending on the market. Other factors that might affect the time include the complexity of the property’s history and the accessibility of the public records.
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Key Takeaways
- A title search is an in-depth examination of public records to verify the legal ownership of a property and identify any claims, liens, or encumbrances that could affect the transfer of ownership.
- Typically performed by a title company, a title search involves reviewing public records to ensure the property’s title is clear and that the seller has the legal right to sell the property.
- The report includes detailed information such as the property description, ownership history, encumbrances, restrictions and covenants, legal proceedings, and taxes and assessments.
- Title searches confirm ownership, identify liens or encumbrances, ensure a clear title, prevent legal issues, and facilitate financing. Skipping a title search can lead to significant legal and financial complications.
