Once you have struck a deal for the home you wish to buy, many things must be done quickly. Home inspections, surveys, title searches, and financing should be accomplished within the first 15 days after the contract is signed, unless you and the seller agree on different terms. One of the most important pieces on this to-do list of important items is the title review, which is the examination of the ownership of the land.
An attorney or Title Company can do a title review. They will look at the properties chain of title and whether the property is encumbered by any judgments, liens, or lawsuits. They also will look for recorded easements and other variances that could affect ownership of the property.
What Is the Purpose of a Title Review?
Also called a title examination a title review identifies issues with the land on which a home is located. A title review has nothing to do with the dwelling or any buildings on your property. The title gives the physical location of the property, as it sits geographically in its neighborhood.
A title review makes sure that the chain of ownership is correct, complete, and that it has no liens, judgments, or lawsuits pending against it. This is what attorneys call a ‘cloud’ on the title. Sometimes an issue is easy to clear up but there are other situations where a buyer may choose to end a deal, based on the title review and time necessary to remedy and title errors.
What Is a Title Abstract?
The title abstract is a written report that shows the history of every change of ownership of a piece of real estate. It will show any claims against the property. Some title abstracts only go as far back as the last change of title on the property. Others will go back 50 or 60 years. Usually prepared by a real estate attorney, Title Company or abstractor in some states, the title abstract will give you a clear picture of the state of ownership of the property you are purchasing.
What Are the Most Important Parts of a Title Review?
Once you receive your title review, you need to read it carefully. It may be as dry as dust but the information can save you many headaches. The title review will list the following items for your consideration.
- Title abstract – shows the chain of ownership of the property as well as any details, vesting or anything recorded against the property, liens, judgments or lawsuits.
- The Title insurance policy with listed exclusions will be part of the review. The exclusions mean that your title is covered but certain items may not be and you need to know what they are so that you can make an informed decision about the purchase of the property.
- The plat of the subject property shows the legal property boundaries and any recorded easements or encroachments.
- The title review should include any HOA or Condo Association documents, including by-laws, the board of director’s minutes, and the names and contact information for board members.
A title review will also find any unpaid property taxes, which will show up as a primary lien against the property. If there are, they will need to be paid and be settled before any other debt holder is paid and to clear the title for the new buyer. If a title review finds any defects that can be corrected title insurance can still be issued but it will have exceptions that it will not cover, based on the title search and its findings.
Will You Need to Purchase Title Insurance?
Yes, you will if you are acquiring a mortgage because your lender will require it. Title insurance is to protect the lender in the event of a defect in the title. Title insurance protects against any title problems unless they are listed as an exception to the policy. It protects your investment from title problems that may arise from information not found in a public records search or missed on the initial search or that has come about due to forgery or fraud.
Are You Purchasing the Property with Cash?
A title review and title insurance are required if you are obtaining a mortgage. If, however, you are purchasing a piece of property with cash, title insurance is not required, but it’s still highly recommended. There are many horror stories of land purchases where the buyer didn’t have an easement by which to access a property, unpaid taxes, for which the buyer becomes responsible, questionable encroachments or other clouds on the title that can cause you numerous headaches after you purchase the property.
A title search is cheap insurance against the above encumbrances on a property that you are purchasing and you may find after a title review that the property is not worth the trouble to clear the title unless it’s a good deal with curable issues.
Are You Ready to Buy a New Home?
Buying a new home should be one of the highlights of your life. As it is one of the largest investments you will ever make, you will find that educating yourself about the process can make the process smoother. A title review is but one piece of this process; although it is one of the most important. Knowing who owns the lot you are purchasing and whether there will be future issues can help you make an informed decision about your purchase.
2 Point Highlight
One of the most important pieces on this to-do list of important items is the title review, which is the examination of the ownership of the land.
Also called a title examination a title review identifies issues with the land on which a home is located.
