A title search is a process that is performed primarily to determine the answer to three questions:
- Does the seller have a salable interest in the property?
- What kind of restrictions or allowances pertain to the use of the land (real covenants, easements, or other servitude's)?
- Do any liens exist on the property which need to be paid off at closing (mortgages, back taxes, mechanic's liens, or other assessments)?
Anyone may do a title search and documents concerning conveyances of land are a matter of public record. However, it is often the case that people choose to contact a title company or attorney to conduct an exhaustive title search. For example, a title report may also show any easements, or recorded legal rights to the property or portions of the property. A previous owner may have legally given a neighbor the right to share the driveway, or the city may have a right to strips of the property for putting power lines, communication lines, water pipes, or sewer pipes. A few on-line services, such as HomeInfoMax.com offer title searches for relatively little cost, and their accuracy is not inferior to what a title company or attorney will offer; however on-line businesses rely mostly on electronically available information, and for that reason could at times be limited.
In the United States, the buyer of a property will usually purchase title insurance, which protects the buyer from any title problems that may arise after sale (such as liens that were missed during the title search). The title insurance company issues a report and issues an insurance policy in support of its findings. However, title searches are most often carried out before contracting is completed between parties and sometimes during the escrow phase of a closing.
A title search is also performed when an owner of a certain real property wishes to mortgage his property and the bank requires from owner to insure their transaction.
Generally, there are two main types of title searching, a full coverage search and limited coverage search; other types include non-insured reports and foreclosure guarantee search.
Full coverage search
A full coverage search is usually done when creating a title report for sale/resale transactions and for transaction that involves construction loans. It generally includes searches related to property lien, easements, CC&Rs covenants, conditions and restrictions, agreements, resolutions and ordinances that will affect the real property in question.
- Search for liens against the owner and the other parties on title.
- Search for liens against the buyer (for sale transactions only).
- Search for Bankruptcy proceedings against the owner of the property.
- Search for liens against the buyer is not something that is covered in a title search.
Limited coverage search
A limited coverage search is usually done when making title reports for refinance transactions that involves ownership equity loans and for making simple title guarantee reports.
This kind of title searching usually includes searches for property liens, liens against the owner and the other parties on title and search for bankruptcy proceedings against the owner of the property.
Non-insured reports
There are a variety of title searches which provide the customer with a report, but no insurance. These are for informational purposes only, and are called by a variety of names, such as Lot Book Report, Plat Certificate, 300-foot Radius Report, and others. These informational searches are used mainly in two instances:
- Probate. This is when a family, lawyer, or court is dividing up the property of a deceased person. Heirs will want to know what liens they are taking on and who has rights to the land.
- Subdividing. To create a subdivision, a person takes land previously platted (legally named and recorded) under another name and renames and re plats it as a new development or subdivision. A report must be given to the city, showing taxes paid and no liens. The owner can then sell the lots individually or en mass, and may record Covenants, Conditions, and Restrictions, which govern how residents may construct their houses or yards, and may limit other activities. Many subdivisions have noise, pet, and trash laws as well.
Foreclosure guarantee search
A foreclosure guarantee is a type of report (e.g. trustees sale guarantee, judicial foreclosure guarantee and litigation guarantee) that is used mainly for foreclosing an encumbrances (or a lien) in a certain property. The title searcher will perform a full coverage search to the property in default and a search for the addresses of the lien holders to the property in default. The addresses will be used for sending copies of the notice of foreclosure letters (such as notice of trustees sale, etc.) to the lien holders to the property in default.
Property Title Search before Foreclosure Sale
Let’s first understand how the property happened to be in foreclosure. A common reason is that current owners did not pay their mortgage or tax bills on-time, causing bank or municipal/state/federal government to place a lien against the property, in other words, the mortgage lender or government wants to get payment on the current owner’s obligations by any means, even if they have to go through the foreclosure expense and auction the house to recover the owed amount or gain possession of the house to sell it latest via real estate agency (REO properties).
If the current property owner had a single lender, then the amount you see at the foreclosure auction might be the only debt against this property (key word is might). In the case where the current owner had, say, a home equity loan in addition to home mortgage(s), there may be two or more liens against the property from different mortgage lenders. Whichever lender files “notice of default” first and puts a lien against the property gets to foreclose on the property first. The payout from foreclosure action to lenders or government always happens in order of court filing. The only way for you, as an investor, to find out what liens, mortgages, debts exist against the property is to order a Property Title search.
Foreclosure auctions (sometimes called sheriff’s sale) are typically held in the municipal (county) courts. The County does not offer you any protection against additional liens on the property, nor do they guarantee you a clean title.
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