What Is Title And Why Is It Important?

Whether you are building a new home or buying an existing home you will deal with the title process. Below is information you can use to understand the title process and why it is important.

Why the Chain of Title Is Important When Buying a House

Before you purchase a new home, a title company will have to perform a title search. It will research the chain of title, or the record of ownership of the property. This is an essential step that can help you avoid a legal and financial nightmare.

What Is a Property’s Chain of Title?

A property’s title is not a single document. It’s a collection of rights that belong to the owner of the property. It covers what the owner may and may not do with the property.

The chain of title is the history of a property’s ownership. It should show that the property passed from one individual to another with no gaps or disputes related to ownership.

How Can a Title Company Help You?

A title company reviews public records related to a property, including documents that were filed each time it was sold. Documents related to a property’s chain of title should be carefully recorded to prevent any confusion or disputes about ownership.

Sometimes, a title search reveals that a document was not filled out or recorded correctly. Even a minor error can create a major problem when someone tries to sell the house. The seller might not legally own the property at all and therefore might not have the right to sell it. Someone else with a deed that was recorded correctly might be the house’s legal owner.

A title company also looks for any liens against a property, such as unpaid property taxes, debts owed to contractors, and homeowners association fees. A lien is associated with a property, not with a specific person. If there is a lien against a house that you want to buy, the deal won’t be able to move forward until someone (the current owner or you) pays off the lien.

In addition, a title search covers a property’s physical boundaries. This is often a point of confusion among homeowners. In many cases, neighbors reach informal agreements or people assume that they know where a property line is located when, in fact, official documents tell a different story. Before you buy a house, you will want to be sure that you know exactly what you’re buying.

Why Should You Purchase Title Insurance?

A problem related to a property’s title might stem from an issue that arose long before the current owner bought the house. The seller may be unaware that there is an issue unless a title company digs it up when researching the chain of title.

Even if a title company does its best to look for any issues clouding a property’s title, a problem might arise in the future. For instance, someone might come forward with a deed to the property, and it might turn out that that individual is the legal owner. Title insurance can protect you from legal fees and other financial losses in that sort of situation.

What Types of Information Might Be Uncovered in a Title Search?

Once you have found a house that you would like to buy, you will need to have a title search conducted before you finalize the purchase. A house’s title refers to legal ownership of the property. Conducting a title search is a critical step in the home-buying process, but prospective buyers sometimes don’t understand what it entails or why it’s necessary.

What Is a Title Search?
Before you buy a house, you need to make sure that the person attempting to sell it actually owns it and has the legal authority to sell it. You may be surprised to learn that disputes related to ownership and other issues frequently come up when someone tries to sell a property. A title search can uncover issues so they can be worked out before the deal moves forward or so you can walk away and avoid a legal and/or financial nightmare.

An attorney or a title search company will go through all public records related to the property you’re thinking about buying. A title search can include a review of documents related to ownership, property taxes, homeowners association fees and bills from contractors, as well as wills, divorce decrees and other documents.

What Sorts of Problems Can a Title Search Uncover?
A title search may reveal evidence that the person trying to sell the house doesn’t have the legal right to do so. Someone else may have a claim to ownership that the seller may or may not be aware of. For example, it’s possible that the house was left to someone in a will decades ago, but the will was only recently discovered, or that a previous bill of sale contained an error or irregularity.

A title search may uncover financial issues. If a homeowner doesn’t pay all property taxes, homeowners association fees and contractors’ bills when they’re due, those debts can get passed on to the next owner. If old debts were never paid, they could become your responsibility. A title search may also find that there is an outstanding lawsuit or a legal judgment related to the property.

A title search may reveal information about an easement that the current owner didn’t mention or didn’t know about. An easement gives a person or entity the right to use a portion of someone else’s property for a specific purpose. For example, an easement may give a utility company the right to access a part of the yard for maintenance and repairs, or it may give a neighbor the right to cross a portion of the property to access a main road. An easement could affect your ability to use the property as you wish, so it’s important to know if an easement exists before you commit to a purchase.