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When you , the property title is transferred from the current homeowner to the buyer. Seems simple enough, right? But the process doesn’t always go smoothly.
That’s why a property title search is an essential part of a home sale. The title search will protect buyers and sellers from last-minute surprises that could delay — or end the sale completely. Here’s what you can expect during the title search process.
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In this article:
What is a property title?
In a real estate transaction, the seller must have the full legal authority to sell the property to a buyer. The term “title” describes the rightful and legal ownership of the property, which can be transferred from the seller to the buyer. Transfer history is recorded in local government records, which are available to the public.
While it may seem straightforward that someone currently living in a house and paying the mortgage would have the right to sell it, there are several reasons why the seller may not have rightful and legal ownership of the home. These may include:
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Liens on the property: A lien is a legal claim by a creditor giving them access to the property if the owner does not repay their debts. For example, a homeowner may have a lien placed on their property if they haven’t paid their or homeowners’ association dues. The owner cannot sell the property until a lien has been released.
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Easements: An easement is the legal right of another party to use a portion of the property for a specific purpose — for example, maybe the homeowner and their neighbor share part of a driveway. While having an easement on a title does not mean the owner cannot sell the property, the details must be disclosed to any buyer.
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Family changes: Divorce and death can potentially affect a property title, and the current owner cannot sell the home if it is still titled in someone else’s name.
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What is a title search?
The title search uses public records to find the names of anyone who has owned the property. The goal of a title search is to determine that the seller has the right to sell the property. In addition to searching deeds and local land records, a title search will also look for the following types of information:
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Liens for unpaid federal or state taxes, outstanding builder or contractor fees, unpaid HOA dues, or unpaid or
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Lawsuits involving the property or property owner
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Court records for divorce, unpaid child support, or bankruptcy
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Deed restrictions that can limit how the property or land can be used
Once the title search is complete, the information is gathered into a document called the Ownership and Encumbrance Report. This report indicates whether the property is free of outstanding liens or pending lawsuits and whether the previous owner has accurately represented the title information.
Who needs a title search?
Both the seller and the buyer in a transaction benefit from the title search.
For sellers, the title search ensures that the title is free of “defects.” A defect is anything on a title that could lead to someone challenging the seller’s right to sell the property or result in a lawsuit. The title search allows the seller to correct any defects they are unaware of and ensure a smooth sale.
Home buyers, on the other hand, need a title search to make sure that all potential liens, loans, judgments, and easements are disclosed before the sale goes through. If a buyer purchases a home with a tax lien on it without knowing, paying off the lien becomes the new homeowner’s responsibility.
Forgoing a title search can cause expensive problems down the road for both the previous and new owner of the house.
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Title search FAQs
Who can conduct a title search?
While anyone can perform a title search, most searches are conducted by title companies. These are third-party companies that specialize in ensuring smooth title transfers. The information needed for a title search is in the public record. Still, title companies are better positioned to know how and where to access that information than the average person.
When is a title search conducted?
In most cases, the title search is performed during — the time between the buyer’s offer being accepted and the closing date. The mortgage lender working with the buyer will typically request a preliminary report from the title company.
How much does a title search cost?
The specific cost of a title search depends on several factors, including what state you live in, the purchase price of the property, and the size of your mortgage loan. Typically, a title search will cost $200 or less and be wrapped up in closing costs. As for whether the buyer or seller pays for the title search — rules may vary depending on where you live, and this can be a negotiable closing cost.
This article was edited by .