If you’re considering purchasing a piece of property or real estate, the “clarity” of the title is a crucial factor. A clear title means the ownership of the property is unquestionable or very clearly defined. Unclear title means there could be some kind of title defect or an issue with the property’s ownership history. Homebuyers need to be sure of their investments, and it’s vital to confirm that no other parties have a stake in a piece of property before purchasing it.
Some people attempt to sell property thinking they have clear title, when, in reality, there is a problem with the ownership history. For example, a person inherits a piece of real estate from his or her parents, but never files the proper paperwork that would establish the recipient’s legal rights to the property. Technically, the recipient in this case has no right to sell the property, because he or she does not have clear title. If there are any problems in the title history of a piece of property, the current owner could have quite a mess.
What Is a Title Search?
Whenever you want to purchase a piece of real estate, thoroughly research the property and its ownership history. A seller may claim to have a clear title but neglect to mention a mortgage or construction lien against the property. If you go through with the sale without researching these issues, those debts become your problems.
One of the most important steps in closing any real estate transaction is the title search. As a buyer, you should be completely certain the seller has a clear title to the property and that there are no other liens or stakeholders in the property that could turn into costly problems for you later. It may sound overly simple, but title searches help ensure a seller has the legal right to sell the property in question. You cannot legally sell something you don’t own.
Proper Online Title Searching
The first step in your search is identifying the property and what deeds you need to find. Ultimately, you want to gather as much information about the property as possible to make an educated decision. Once you have the address and current property owner’s information, check with your county clerk’s office, county tax assessor’s office, or county recorder’s office. Most counties store public records digitally for online access. Try to find the records you need through these offices’ online portals, but if your county has not moved public records to digital storage, you may need to visit the offices in person.
After obtaining the property tax information and records, search for the property deed online. Most states provide these for free or for a small fee. Start by locating the most recent deed that contains the name of the current owner and the name of whoever sold the property to the current owner.
This should point you in the direction of the previous deed, and so on. Each deed will indicate the previous deeds, and you should gather as many as possible. You may wind up going back 50 or more years to ensure the title passed correctly with each transaction. Just like searching for the tax information, if the property’s deed history is not available online, you’ll need to visit the appropriate county office in person to find them.
After establishing a chain of title, you can be sure the property ownership correctly and legally changed hands each time. Now, you can start searching for any tax issues or liens against the property. Any outstanding taxes or judgment leans against the property should deter you from purchasing, but speaking with a real estate attorney can help clarify anything that appears to be a problem. If you’re unsure about the purchase, title insurance can offer peace of mind.
Title Companies and Title Insurance
Many investment professionals, especially those working with real estate, suggest partnering with a title company. The title company will perform thorough, extensive research into a piece of property to ensure clear title. Then, the title company will provide you with a title insurance policy that states the property has been thoroughly reviewed and has a clear title. A title insurance policy aims to protect homebuyers from unforeseen issues such as liens, mortgages, or other stakes in the property.
While working with a title company can limit the uncertainty surrounding a purchase, the research and insurance policy can cost hundreds, if not thousands, of dollars. While you may forego the professional layer of peace of mind a title company offers, you can save yourself quite a bit of money by researching the title on your own. You risk missing potentially costly details a title company wouldn’t, but you save time and money. For less-risky transactions, performing the title search on your own is likely the wiser choice.