Property Title Search: What It Is And How It Works

Congratulations on finding your next home! Buying a house is an exciting life event, but the joy can often be tempered by the stress of completing all the necessary steps, from offer to closing, to your lender’s satisfaction. It’s hard to remember at times, but all those steps are for your – and your lender’s – protection.

A few of the critical steps include obtaining an inspection, having the home appraised and conducting a property title search. Today, we’ll take a closer look at the property title search and how it can protect your home purchase.

When you’re buying a home from a seller, you’d likely assume that the seller is entitled to sell the home in question. However, that assumption can lead to heartbreaking consequences if someone else with a claim or lien on the property shows up on the doorstep.

A property title search examines public records on the property to confirm the property’s rightful legal owner. The title search should also reveal if there are any claims or liens on the property that could affect your purchase.

Finding out who owns the property you want to buy is only the first step. First, the current owner might not even be aware of an old claim against the property’s title. Second, the debts of any of the previous owners can come back to haunt you because mortgage liens and other debts – as well as easements and restrictive covenants – follow the property, not the owner.

Encumbrances like unpaid property taxes, homeowners association (HOA) fees and bills for past home improvements might become your responsibility if you were to skip a title search – or if the title search failed to find it. That’s why mortgage lenders require both title searches and title insurance as part of the mortgage underwriting process.

A title search digs into the public records available for the property in question. Typically, an attorney or title company will use a variety of legal documents to establish a chain of title and confirm that the seller is truly the rightful owner. Beyond that, the title search will root out any other financial and/or legal claims on the property.

The Process

The person conducting the title search can be called an abstractor. The abstractor conducts an examination of public records and works to pull together all the relevant information and legal documents that they can find about the property to create an abstract of the title. The abstract of title will include a recorded chronology of all available documents and transactions related to the parcel of real estate in question.

The abstract could include the current owner and previous owners. It could also include past surveys of the property, any easements that cross the property and any relevant wills and lawsuits that involve the property.

The Findings

A title search can uncover any financial rulings against the owner of that property title which could affect you financially in the future. A few examples of these title problems include outstanding property taxes, any liens against the house and easements of any kind. If there are any outstanding claims on your property, that could bode badly for your happily-ever-after in this new home.

It’s critical that your house title search shows clear and free ownership of the property. Otherwise, you could be in for an unpleasant surprise down the road. Luckily, there are ways to mitigate the potential risk of a claim on your new property’s title.

For example, you can purchase title insurance or secure a warranty of title. The one-time purchase of a title insurance policy can protect your ownership claim of the property, so it’s worth considering the expense (which is usually 0.5 – 1.0% of the purchase price and is typically included in your closing costs).

A title company or attorney will typically take care of the title search. In some cases, the lender or the individual home buyer may take over this process instead.

If you choose to tackle the title search process on your own, you can seek out the records you need at places like the county courthouse, the recorder’s office, and the county assessor office.

It might be a good idea to let the professionals – such as real estate attorneys – handle this part of the home buying process. Legal documents can get confusing to the untrained eye, and you don’t want to accidentally overlook something important.

The speed of a title search will vary dramatically based on the complexity of the documents surrounding the property in question.

A title search will involve obtaining records from multiple sources which can delay the process if an office is slow to respond.

Once the documents are in the hands of the title company examiner, it could take a few hours or a few weeks to pore over the documents for any outstanding claims. 1-2 weeks is a common general time frame for most title searches.

Old Vs. New Homes

Typically, a newer home will have fewer documents to go through which results in a faster process. An older home, on the other hand, may have more records that need to be reviewed, which could prolong the process.

Although it can be frustrating to wait, you shouldn’t rush the title company examiner. You want them to do their job as thoroughly as possible to prevent any issues in the future.

In general, the cost of a title search will range from $75 – $200. The price can vary based on the state you’re purchasing a property in, but that’s a good estimate. At the end of the process, you should receive an easy-to-follow report on the documents connected to the property and the highlights of any encumbrances that could create an issue if you move forward with the purchase.

Of course, you can dramatically reduce the cost of a title search by conducting it yourself. However, the importance of a title free of any outstanding claims is absolutely critical. It might be a good idea to leave this step to the professionals and consider the cost – in addition to other title fees – as necessary to moving forward with your home purchase.

A title search is one key piece to the home buying process. However, it’s not the only part of the process that can be confusing for a home buyer. The best way to feel more comfortable with your home purchase is to understand the ins and outs of the process. With more knowledge, you’ll be able to move forward at your own discretion knowing that the purchase is still in your best interest.

Make it a priority to understand the steps of buying a house so that you can move forward confidently into your dream home! Take action and start the homebuying process with our help.