In the home buying and selling process, the title report is one of the most important documents. So what is a title report? “The written analysis of a real estate title search,” the title report is a must-have for lenders to approve the financing of a property. Title reports are typically prepared by a title company, an attorney, or an escrow company. A The title report should include a property description, the identities of the property owners, encumbrances on the property, and real estate tax information.
What Is Title?
“Title” refers to legal rights of ownership. A legal document, such as a deed, bill of sale, or certificate of title shows ownership. Whoever has legal title can control or dispose of the property.
Held titles happen for several reasons:
- Sole ownership: One person has all the rights of an owner. Sole owners can occupy, lease, sell, and bequeath the property.
- Tenancy in common: Two or more people can jointly hold the title. One example is in business, where several partners purchase an investment property.
- Joint tenancy with rights of survivorship: In this type of title, two or more people jointly hold title, like in a tenancy in common. But, if a joint tenant dies, the deceased’s interest in the property automatically transfers to the remaining tenants. If only one joint tenant survives, the title becomes sole ownership.
- Tenancy by the entirety: In this form, a married couple is treated as a single entity so each individual is entitled to 100% of the interest in the property.
Reasons for Reviewing a Property’s Title
Review of a property’s title, known as a title search, is a critical step in any home-buying process. If you are buying a home, you want to be sure the person selling to you actually has the legal right to sell the property. As much as possible, you want to prevent any future questions of your ownership. You also want to avoid the burden of paying past owners’ debts. The title search will identify any issues in the chain of title, such as liens and judgments, problems with the legal property description, and other issues that could interfere with the transfer of ownership. About 25% of all residential real estate transactions have issues with the title that title professionals resolve before closing.
Additionally, most mortgage lenders and mortgage insurers require the production of a title report. The results of the title search affect the issuance of a title insurance policy, which protects the policyholder from financial losses due to defects in a property title. You likely will need to pay for the lender’s title insurance, which protects your mortgage holder’s investment in your property. You also can obtain owner’s title insurance to protect yourself and your interest in the property.
What Is a Title Report: Possible Problems
The title report should uncover any defects in the title that could interfere in the transfer of ownership. Common title problems include:
- Errors in public records: Mistakes made in official documents, such as clerical or filing errors, could affect the validity of the deed.
- Property liens: Banks or other financing companies could place a lien on the property for the unpaid past debts of prior owners.
- Illegal deed: If a prior deed was made by someone not legally entitled to enter into a legal agreement, the enforceability of that deed could be affected. A deed could be illegal if made by a minor, someone not of sound mind, an undocumented immigrant, or someone reported as single who actually is married.
- Heirs: Sometimes heirs are unknown or missing at the time of a property owner’s death. Family members could contest the will to establish property rights.
- Forged documents: Forged documents affecting property ownership filed within public records obscure the property’s rightful owner.
- Encumbrances: A third party might hold a claim to all or part of the property, limiting the use of the property.
- Boundary disputes: Surveys might exist that show different boundaries for the property.
- Undiscovered will: The state sometimes sells a deceased property owner’s assets if that owner dies with no apparent will. However, if a will is discovered in the future, it can jeopardize property rights.
- Impersonation: If you buy a home once sold by someone falsely impersonating the property owner, then your legal claim to the property is at risk.
- Building code violations: Discovery of unresolved violations could affect a title.
Preparation of a Title Report
Though you can run a title search on your own, doing so is not recommended. A title report is best prepared by an experienced title officer, title company, or attorney. They know what information to review, where to locate documents, and how to interpret the content of those documents. A preliminary title report is sometimes provided by the seller. The buyer or buyer’s lender commissions the full title report, typically once the property is in escrow.
Documentation that relates to the property, its ownership, and the owner is reviewed to determine the chain of ownership and to locate possible issues with the title. Public records are the source of information. Specifically, information reviewed could include:
- Property deeds filed with the county
- County assessment records
- Mortgages
- County land records
- Divorce cases and settlements
- Bankruptcy court records
- Tax lien records
- Street and sewer assessments
- Land surveys
- Wills
- Court filings
- Tax search
- Property information databases, such as ProspectNow
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