How
do you know that the seller really owns the property he or she is offering to
sell? That’s one reason when you decide
to buy a home, your lender will probably require that a title search is
performed. A title is
a legal term for a collection of rights in a piece
of property and refers to a formal document such as a deed that
serves as evidence of ownership.
Delivery
of the deed may be required in order to transfer ownership in the property to
another person. Title is distinct from possession, a right that
often accompanies ownership but is not necessarily sufficient to prove it. For
real property, like a home purchase, land registration and recording provide
public notice of ownership information.
A
title search is the examination of public records to determine and confirm a
property’s legal ownership and to find any claims that may have been made to
the property. The title company or an
attorney will search all public land records going back many years. It is estimated that over a third of all
title searches reveal a title problem that are fixed before the closing
occurs. Some of these include Mechanics
Liens and Mortgage Releases.
Mechanics Liens
When
a home is constructed or remodeling occurs, the general contractor is
responsible for paying off their subcontractors. If this is not done in a
timely manner, the subs can file mechanics liens to protect their
interests. These can remain on the property even after they are paid if the sub
does not take the time to file a lien release with the county clerk.
Mortgage
Releases
During
the refinance boom of 2000 – 2005, homeowners repeatedly refinanced at a
furious pace, sometimes more than once annually. Each time a mortgage is
“refinanced”, the mechanics of the transaction are actually a new mortgage
which pays off an old one. The prior mortgage company is supposed to record a
mortgage release clearing the old loan from the title. These require a trip to
the land records office and a filing fee to be paid by the mortgage company.
Some mortgage lenders did not always record releases on every mortgage paid
off, (to save money, time, or just due to excessive volume) leaving homeowners
with double mortgages on title.
In
spite of all the expertise and dedication that go into a title search and
examination, hidden hazards can emerge after closing, resulting in unpleasant
and costly surprises. With title
insurance, the home owner is covered from loss.
Some examples of hazards include:
- A forged signature on the deed, which would mean no transfer of ownership to you;
- An unknown heir of a previous owner who is claiming ownership of the property;
- Instruments executed under an expired or a fabricated power of attorney; or
- Mistakes in the public records.
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