How The Title Search Works
A title search is an early warning system for buyers and lenders. It reveals flaws the owner must resolve prior to a closing or refinance request. This allows the owner to clear any clouds on the title so that the process can move forward. Also, it protects the buyer or lender from assuming an obligation they aren't responsible for.
Title Search
A chain of title exists in public records. It shows the history of property title transfer from each previous owner to the next. Unfortunately, these searches are labor intensive and require a specialist called a title examiner.
The search may take the title examiner back to a time when property laws were much different. Technically, only 40-60 years are required, but this could leave a cloud of title on older properties. So, title examiners typically go back to the original owner.
Tax Search
The second step involves a search for tax records to ensure there are no unpaid taxes that could result in a tax lien on the property. The local municipality could hold buyers responsible if the taxes aren't paid prior to closing.
Inspection
If the title insurance is for a refinance loan, the lender often orders an inspection. The inspector examines the property to investigate whether there are any encroachments or other defects that affect the title. They also verify the lot size, note unrecorded easements and the marked location of improvements.
Judgments
Judgment decrees, liens and unpaid federal taxes entail a claim on the property that supersedes a lender's or buyer's rights. Therefore, if discovered judgments create a cloud on the title, the current owner must resolve them before the transfer of title to the buyer.
Closing
The lender or buyer and seller can proceed with the closing after all defects have been cleared. However, the title company won't issue a commitment to insure the property if clouds remain on the title.
Understanding how the title process works can make the closing process easier and might make buyers a little more patient while waiting for the title commitment to arrive.
A trusted mortgage advisor with Bond Street Mortgage will be there to guide you through the process and help you communicate effectively with your lender. This partnership can be a key element to a successful transaction.
Frequently Asked Questions
A title search acts as an early warning system to reveal any flaws or clouds on the property title that must be resolved before closing or refinancing, protecting buyers and lenders from assuming unwanted obligations.
Although only 40-60 years are required, title examiners usually go back to the original owner to ensure there are no clouds on older properties.
A tax search ensures there are no unpaid taxes or tax liens on the property, which could hold buyers responsible if not cleared before closing.
The inspection checks for encroachments, defects affecting the title, verifies lot size, notes unrecorded easements, and confirms the location of improvements.
All title defects, including any judgments, liens, or clouds on the title, must be resolved by the current owner before closing can proceed and the title insurance commitment is issued.
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