What a Title Search is and How it Works

Great news on discovering your next home! Purchasing a house is an exhilarating milestone in life. But the thrill can sometimes be dampened by the pressure of fulfilling all the essential requirements. 

From making an offer to satisfying your lender’s expectations, it can be a lot. Despite the difficulty of keeping track, all these measures are crucial for your and your lender’s safety.

Among the significant measures are getting an inspection, having the house assessed, and performing a property title search. In this article, we will focus on the property title search and how it can safeguard your home acquisition.

What does a title search involve?

When purchasing a home from a seller, it’s natural to assume that the seller has the right to sell the property. However, this assumption can result in devastating outcomes if another party with a lien or claim on the property comes forward.

To avoid such situations, a property title search investigates public records pertaining to the property to verify its lawful owner. The title search also uncovers any liens or claims on the property that could impact your purchase.

Why is a title search necessary?

Determining the property’s legal owner is just the initial stage when purchasing a property. The current owner may not be aware of any past claims on the property’s title. Additionally, the debts of previous owners can become a problem for you. Mortgage liens, easements, restrictive covenants, and other debts remain attached to the property and not the owner.

Forgoing a title search may result in failing to discover and encumbrances. This could include unpaid property taxes, HOA fees, or bills for past home improvements. In that instance, you might be held responsible for them. That is why mortgage lenders require both a title search and title insurance as part of the mortgage underwriting process.

Identifying who owns the property

The title search delves into the public records associated with the property in question. Typically, a lawyer or title company will use various legal documents to establish a chain of title. This will confirm that the seller is the rightful owner. Furthermore, the title search uncovers any financial and/or legal claims on the property.

The title search process

The individual responsible for conducting the title search is known as an abstractor. This person scrutinizes public records and assembles all pertinent legal documents and information related to the property to construct a summary of the title. This abstract of title encompasses a recorded timeline of all available documents and transactions associated with the real estate.

The abstract of title may comprise information about the current owner and previous owners. It may also include prior property surveys, any easements that traverse the property, and any relevant wills and litigation involving the property.

The results of the title search

The title search may disclose any financial judgments against the property title owner that could have future financial consequences for you. For instance, outstanding property taxes, liens against the property, and any kind of easements are some examples of title issues that could surface. If there are any unresolved claims on the property, it could jeopardize your future ownership of the property.

It’s crucial for the title search to confirm the property’s clear and unencumbered ownership. Otherwise, you may be unpleasantly surprised in the future. Fortunately, there are ways to reduce the potential risk of a claim on your new property’s title.

For instance, you could obtain title insurance or a warranty of title. Purchasing a title insurance policy is a one-time expense that protects your ownership claim of the property, so it’s worth considering (usually around 0.5 – 1.0% of the purchase price and is usually included in your closing costs).

Who conducts the title search?

A title company or attorney usually conducts the title search, although sometimes the lender or home buyer may take on this responsibility.

It’s advisable to entrust this aspect of the home buying process to professionals such as real estate attorneys. Legal documents can be difficult for the untrained eye to comprehend, and you don’t want to inadvertently overlook anything critical.

How long does a title search take?

The time it takes to complete a title search can vary significantly based on the complexity of the property’s legal documents.

A title search requires obtaining records from various sources, and delays may occur if an office is slow to respond.

After the title company examiner receives the documents, it may take several hours to a few weeks to review them thoroughly. Typically, a title search takes around 1-2 weeks to complete. 

Keep in mind this may vary based on the specific circumstances of the property.

Older vs newer properties

In general, the title search process for a newer home may be faster as there are typically fewer documents to review. Conversely, an older home may have more records that require examination, potentially prolonging the process.

While it may be tempting to rush the examiner, it’s important to allow them adequate time to conduct a thorough search. This ensures any potential issues are identified and addressed.

The cost of a title search

The exact amount of a title search will vary depending on the state where you’re buying the property. After completing the search, you should receive a report that presents the relevant information and significant encumbrances related to the property. 

It is crucial to have a clear and encumbrance-free title. This is why the task should be left to professionals, even though it adds to the other title fees. Although you can save some money by doing it yourself, the importance of a thorough title search cannot be overstated.

The bottom line

A title search is an important aspect of the home buying process. But it’s important to remember it is just one of many components that can be overwhelming for buyers.

 To ensure a successful home purchase, it’s essential to work with someone familiar with the entire closing process. With Arena Collective by your side, you can take the necessary steps to make your dream home a reality!