Did you know that a title and a deed are two different things? When you’re considering purchasing a new property or home, you need to understand the difference.While a title and a deed are two separate documents, they work together to purchase a specific piece of property.
- A deed transfers the rights of ownership to the buyer of a property.
- The title changes the property owner into the buyer’s name and gives them rights to sell the property in the future.
To avoid any legal issues during the purchase, a title and deed search should be performed. You can think of a title, and deed search as a “background check” for a property — much like a prospective employer conducts a background check on a potential employee. Before closing, the buyer must verify that the current owner is valid, be aware of any liens on the property, and any other issues that may come up that may challenge the transfer of ownership. Now that you understand titles and deeds let’s dig into the search process and show you how it all works.
Why Do I Need To Get A Title Search?
A title search involves examining numerous documents. It consists of searching deeds, contracts, and any recorded papers to determine if the current owner owns the property free and clear of any issues. As the buyer, you want to ensure that you get a clear title to avoid future legal problems.No matter if the buyer is purchasing the property with cash or a mortgage, the title search protects them from any issues that may creep up during the closing process that could jeopardize their ownership.While we’re talking about problems, let’s take a look at some of the most common issues that come up when you start doing a title search.
9 Common Problems During a Title Search
Problem #1. Break In The Chain Of Title
The chain of title is all documents regarding the property in the past and ends with the most recent document filed against the property. For example, a title transfer was inaccurate at the time of a previous sale. This could be caused by human error, such as a misspelled name, but it could also indicate fraud.
Problem #2. Liens On The Property
If a property owner has failed to pay a debt, a claim can be filed against the home. When a lien is filed, it gives a creditor a way to recover money owed to them. While a mortgage is a voluntary lien, involuntary liens are filed by another entity to which the owner owes money. Common types of involuntary liens are:
- Unpaid real estate taxes
- Unpaid income taxes
- Mechanics liens – when a contractor that worked on the home did not get paid
- Judgment lien – when a creditor is owed money
- Divorce lien – when the other spouse files a lien to stop the sale of the property
Any of these liens impact the ability to buy or sell a property. The homeowner needs to negotiate to remove or release the liens to proceed with a real estate transaction.
Problem #3. Easement
An easement is where a title to a specific property belongs to the landowner. Still, another person or organization is given the right to use the land for a specific purpose. For example, a utility company may have an easement allowing access to an electrical pole on the property. There could also be an easement on a property if it blocks access to the main road.
Problem #4. Bankruptcy
If the current owner has filed a bankruptcy in the past, the ownership may be unclear. Depending on the type of bankruptcy, the home may be held in trust until the bankruptcy is cleared.
Problem #5. Probate Property
When a person passes away, their property goes through probate. Someone may occupy the property after the owner has passed away. This may cause someone else to claim ownership of the house while it’s in probate.
Problem #6. Zoning Ordinances
Depending on how a property will be used, the zoning must reflect the use. If the property will be used for a reason other than the current zoning (i.e., residential) but the buyer wants to have a home business, there are zoning ordinances to consider before the purchase. A title search will reveal this information.
Problem #7. Multiple Mortgages
There are times when a property owner takes out a second mortgage on a property. In this case, both mortgages must be paid off for a sale to continue.
Problem #8. Foreclosure
If the current owner failed to make mortgage payments, it is possible that a third lien was placed on the home from a private lender or another party that no one knew about.
Problem #9. Cloud On A Title
A cloud on a title is a term used to refer to a claim or encumbrance that could cast doubt or nullify a title. For example, there may be a mortgage lien or unpaid taxes on the property. A cloud on a title can delay the sale and transfer of a property but can generally be resolved by filing a quiet title action or a quitclaim deed.Any of these issues could cause a delay in the purchase process. Title insurance provides protection when a buyer needs to resolve a title issue.
What Is Title Insurance?
Title insurance is a way to protect the buyer from any financial loss due to legal expenses if a defect or fraud is found in the title to a property. Title insurance focuses on risk prevention rather than assumption. With title insurance, examiners look at the property’s history and work to eliminate title issues before the purchase. Title insurance doesn’t have a monthly payment, just a one-time premium paid at closing.There are various issues that title insurance protects against. Having title insurance is crucial because you may not learn about title defects for months or even years after purchase.
10 Common Risks Covered by Title Insurance
Some of the most common examples of risks covered by title insurance are:
Risk #1. Improper Execution of Documents
The term “execute” in this context means that a contract is signed between two or more parties for the purpose of a legal transfer of ownership. Most often, improper execution applies to the deed, and if a mistake is found, it could void the deed and its ability to be used to transfer property.
Risk #2. Mistakes in Recording and Indexing Legal Documents
The most common problem is that a deed cannot be located through property deed indexes. This could be the result of a mistake of indexing a deed under the wrong name.
Risk #3. Forgeries and Fraud
Fraudulent deeds have one or more forged details. For example, an unauthorized representative signs the deed fraudulently. In other forged deeds, individuals could make up a name or identify themselves as the owner’s representative. When these situations occur, if the property is sold without a title and deed search, the property could be sold without the rightful owner’s knowledge or consent.
Risk #4. Undisclosed or Missing Heirs
This can happen if the owner of the property being purchased has passed away. The previous owner may or may not have had a will, but unknown heirs may still appear and sue the prospective buyer to keep the property for themselves.
Risk #5. Unpaid Taxes
Property tax is mandatory for any property. These taxes can be paid either through an escrow account or by the owner directly. However, if these taxes are not paid and current, the sale of a property is delayed until the taxes are paid in full.
Risk #6. Unpaid Judgments and Liens
A judgment lien is imposed on a property if someone sues the owner and wins a money judgment against them. A standard lien is where several circumstances when the owner did not pay a debt.
Risk #7. Unreleased Mortgage
There are some cases where a mortgage has been paid but not released. The most common reasons for an unreleased mortgage are:
- A prior title policy is in force, and a hold harmless release must be sent to the title company.
- The home had a HUD-1 mortgage, and the person who paid off the mortgage is not the last recorded owner.
- The statute of limitations for the period of repayment has lapsed.
Risk #8. Mental Incompetence
The grantor on the deed must be mentally competent. Identifying if the individual is mentally competent to handle a real estate transaction is complicated because of the different standards for each type of transaction.
Risk #9. Impersonation of Actual Owners of Property by Fraudulent Persons
An individual may forge their name on a deed for a property or even approach a homeowner who they know is in financial trouble and trick them into signing the deed over as a receipt of repairs or another small loan.
Risk #10. Refusal of the Purchaser to Accept Title Based on Condition
If the property is being offered to the buyer, they should look for any potential issues before accepting. It’s best to refuse a deed if your due diligence shows that the property will create significant burdens on the new owner.
How Do I Search For A Title And Deed?
Now that you know the hows and whys of a title and deed search let’s look at how to conduct a title and deed search. You can search for the title and deed by owner’s name and property address. This search can be done in various ways. Let’s take a look at these ways of finding a title or deed.
Visit Your Tax Assessor Office
When you visit your County Tax Assessor’s office in person or online, you can enter the county, property owner, or address for a specific property. However, searching the website yourself may offer few results. The best way to find a title and deed is by using the property’s identification number. There are various ways this number is referenced. It all depends on your state and county. Even though the information is free, every county has its website and search function, which may or may not be intuitive and easy to use.
Contact the County Recorder or Clerk
The County Recorder or Clerk has information on property owners. They have all documents associated with a property and the people associated with it. Documents at the Recorder or Clerk’s office associated with properties are things like:
- Notice of Sale
- Mechanic’s liens
- Bill of Sale
- Deeds of Trust
- Tax liens
- Trust Deeds
The County Recorder or Clerk’s office has a lot of information if you have the patience, time, and strategy to go through all of the records. If you’re searching in numerous counties, it can be a long, tedious process. There’s no consistency between county websites, and you can’t view the information before you purchase the report.
Check with Your Local Title Company
Your local title representative can provide you a general Focused Real Estate Marketing (FARM) list. They can search by name, address, mailing address, property characteristics, neighbors, comparable sales, transaction history, and depending on the state, you can find demographic and school information.If you’re searching for information beyond what you find at the County Recorder or Clerk’s office, there will be a fee for this information. You’ll also be waiting for a bit to get the information, most title company reps are busy, and it may take them a while to provide you with the information you need. There’s no automatic organization to the documents you receive and no ability to refine lists, gain insights, or automatically update the list when property conditions change.
Can I Do My Own Property Title Search?
If you’re a real estate broker or agent and want consistent, high-quality leads to keep your inventory up to date and fresh for buyers, using property data and owner information software is a must-have. This software isn’t just for realtors, mortgage, and real estate investors, and home property services also benefit from access to these records as well as the advanced search functionality that these applications provide.Using property data and owner information software provides:
- Access to nationwide property owners
- The ability to mix and match property, mortgage, owner, demographic information, and more to create mailing lists
- Explore leads and refine your marketing lists
- Advanced capabilities such as links to social media, skip tracing, emails, and phone numbers
- Mobile applications with GPS, the ability to add notes, images, and files
- Integration and automation functionality
While this software is not free, it provides robust information on any property or group of properties. It is mainly used by professionals who want to take the time to explore the information and get the vast amounts of data available.
Are You Ready to Take Your Title Searches to the Next Level?
At Property Scout, we provide 24/7 support backed by a 30-day money-back guarantee. So what are you waiting for? Start your search now!