Buying a property is the biggest financial decision most people will make in their lifetime. You want to ensure you are thorough during every step of the process so you won’t discover any big shocks after closing. A property title search is a process of gathering documents that show who has the legal right to own the property in question and, through that ownership, to sell it. While it may seem simple and obvious that the home seller is the owner, there may be hidden claims or liens on the property by other parties that the seller and buyer may be completely unaware of and could lead to problems for you and your family down the road. This is why it is important to find a reputable title company to carry out a property title search during the home buying and selling process.
The Benefits of a Property Title Search
A property title search performed by an experienced title company during the home buying process has many benefits. Pinpointing issues in the early stages, such as property liens, will cut down on delays in the process and can even save you money.
- If a lien is discovered on a property you are interested in, settling it early can help you to avoid complications that could have turned into large issues late in the game. For example, property liens that aren’t dealt with can make getting a mortgage loan from a financial institution much more difficult.
- If a property lien for unpaid taxes is on the books and the sale of the home goes through, local government agencies could attempt foreclosure on the home. Taxes are attached to a home, not a person, so the current owner could be liable for those funds. Other property liens can be filed for various reasons including for work on renovations that were unpaid, child support payments, and even credit card debt.
- Without a property title search, many other issues could sneak up on you when you finally decide to close on your new home, including undisclosed debt or encroachment. Working with a title company will help you avoid these last-minute issues.
Conducting a Property Title Search
You may be wondering what exactly a title company does when conducting a property title search. Put simply, they search through the title records of the property starting with the current owner backward. However, it isn’t always as simple as it sounds to find all the information despite most of it is public record. Depending on the jurisdiction, liens and judgments on a property may be filed in a number of different ways – the name of the buyer, the name of the owner, the street address, lot number, etc. A thorough title search will include information about mortgages, street and sewer assessments, taxes and levies, and countless other issues that could taint an otherwise sound transaction.
If a Property Title Search Uncovers a Serious Issue, Can the Buyer Back Out?
Some claims on the title, such as a property tax bill or an unpaid electric bill, can be resolved by the owner. The mortgage lien can be resolved by a payoff from the home sale proceeds. But things like undisclosed easements, if they’re intrusive, could be deal-breakers. The buyer can cite the marketability of title contingencies in the purchase agreement to back out of the deal prior to closing.
In some transactions, such as foreclosure sales, defects in the chain of title are no surprise, and the title company works to cure them. Most of this important work is done behind the scenes.
In other cases, some title defect from the past catches the seller unprepared. When the buyer and seller fail to work out a remedy, negotiations can break down. Sometimes, backing out and getting the deposit back is the only reasonable choice for the buyer.
Tough situations may require a lawyer’s representation, to pursue a quiet title action in hopes of curing the defect.