|
You've decided to purchase a home and hope to take possession
as soon as possible. The terms have been agreed upon and
all the financial arrangements have been made. But there's
one important detail remaining. Before the transaction
can close, a title search must be made.
The most accurate description of title is a bundle of
rights in real property. A title search is the process
of determining
from the public record just what these rights are and
who owns them.
A title search is a means of determining that the person
who is selling the property really has the right to sell
it, and that the buyer is getting all the rights to the
property (title) that he or she is paying for.
The search process can be undertaken by the title company
in those jurisdictions where the company maintains offices.
In some areas, however, searches are made only by practicing
attorneys. However the search is performed, in most real
estate transactions today a title insurance policy is purchased
to assure the buyer that he or she has purchased a valid
title.
In those transactions where title insurance is involved,
the title company must determine insurability of the title
as part of the search process. This leads to the issuance
of a title policy, which insures the existence or non-existence
of rights to the property.
The title insurance company will, at its own expense,
defend the title and will pay losses within the coverage
of the policy if they occur.
But what exactly, is involved in a title search? The Chicago
Title and Trust Family of Companies provides the following
step-by-step review:
Chain of Title
This is simply a history of the ownership of a particular
piece of property, telling who bought it and sold it,
and when. The information may be derived from public
records ÷ usually a County Clerk's or Recorder's
Office ÷ or obtained from title plants privately
owned and maintained by title companies. There are great
varieties of such plants ÷ index cards, punch
cards, tract books, even sophisticated computerized plants.
However, they all contain essentially the same information
from which the history of the title may be secured.
Tax Search
This is a search to determine the present status of general
real estate taxes against the property. The tax search
will reveal if taxes are current or whether any taxes
are past due and unpaid from previous years. In addition,
the tax search will indicate the existence of any special
assessments against the land and, if so, whether or not
these assessments are current or past due.
A due and unpaid tax or special assessment is a prior
lien or claim on the property above all others. If a buyer
purchases property with unpaid and past due taxes or assessments
against it, he or she is likely to find a government body ÷ the
village, county or state ÷ placing the property
up for sale to pay those taxes or assessments. A tax search
reveals the status of the taxes. Title insurance protects
the buyer against loss from unpaid and past due taxes and
assessments.
Report on Possession
In many places where it operates, the CTIC Family sends
inspectors to look at the property to verify the lot
size, check the location of improvements, look for evidence
of easements that are not shown of record and check on
who is living there.
The purpose of this is to supplement the information learned
from the title search. In the eyes of the law, any buyer
of real estate is assumed to have notice of all matters
properly shown in the public records as to that real estate
as well as any information that an actual inspection may
reveal.
If the inspector detects an unrecorded easement or other
evidence of outstanding rights that could affect the owner's
title and possibly the value and intended use, the company
tells the buyer of these things before he or she closes
the purchase. Those matters must then either be disposed
of or shown as exceptions in the title insurance policy.
Sometimes when an acceptable survey and appropriate affidavits
are received, an inspection will not be made.
Judgment and Name Search
One of the most important parts of the title search is
to determine if there are any unsatisfied judgments against
the seller or previous owners which were in existence
while they owned the title. A judgment is a general lien
against the debtor's real estate and constitutes security
for any money owed under the judgment. The real estate
can be sold to satisfy the judgment.
It is extremely important to be sure that a title is not
subject to judgments against the seller or previous owners.
Title insurance provides this protection. A judgment against
a person named Smith may affect the title of a seller named
Smith, depending on whether or not they are the same person.
So all possible variations of the name must be examined.
For example, the name Smith might be spelled Schmidt,
Schmid, Schmidtt, Schmidz, Schmied, Schmiedt, Smid, Smythe,
and so on. The name Nichols can be spelled 73 different
ways, from Nachols to Nychals. The task is to determine
which of these applies to the owner in question. First
names have to be checked, too. There are 25 foreign forms
of John, including Johann, Jehan, Hans, Shaun, Gudi, and
Efom.
Rights established by judgment decrees, unpaid federal
income taxes, and mechanic's liens all may be prior claims
on the property, ahead of the buyer's or lender's rights.
If a judgment is discovered that constitutes a defect in
the title, it is pointed out, and the seller must then
eliminate it before the title of the new buyer can be insured
free and clear of that judgment.
Commitment
When these searches have been completed, the title company
issues a commitment to insure, stating the conditions
under which it will insure the title. The buyer and seller
and the mortgage lender can proceed with the closing
of the transaction after clearing up any defects in the
title which may have been uncovered by the search and
examination.
The mortgage lender is as concerned as the buyer about
the quality of the title because the property is to be
security for the new mortgage loan. The mortgage lender
requires assurance that it has a valid first (or another
acceptable priority) mortgage lien on the property. This
is not only common sense, but generally is a legal requirement
of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect
the new buyer of the property. Although the land is the
same, the interest of the buyer and the interest of the
lender are very different. The provisions of a lender's
title insurance policy are very different from those of
a buyer's policy, so the buyer should obtain his own policy,
often issued simultaneously with the lender's policy.
--------------------------------------------------------------------------------
Copyright © 2003 Chicago Title Insurance Company.
All Rights Reserved.
|
