Title searches are most often conducted in conjunction with the sale and purchase of real estate. This is the process of uncovering and reviewing all available recorded information about the title of the property being sold in order to identify any ownership rights issues or unsettled claims. In this article, we will discuss why all homebuyers need to have a title search done on their future home. We will also cover what happens during the title search process and after it is completed. As a provider of title insurance in Long Island and New Jersey, ANSTitle wants to ensure that homebuyers understand the true value of our products and services.
Why do I need a title search when purchasing a home?
If you’re a first-time homebuyer, you may be wondering if the title search is really needed or if it is simply one more closing fee you must pay. The truth, however, is that title searches are critical for protecting your interests as a homebuyer and can save you from unexpected financial losses later on.
The goal of the title search is to uncover any issues that may jeopardize the ownership rights of the homebuyer or, at minimum, cost lots of money to resolve. For one, you want to ensure the person trying to sell you a house has the legal rights to do so. Imagine, for example, if one owner sold a property without the knowledge of a second owner. The left-out owner can come back and claim half of your property at any time.
Or, in another scenario, the past owner may have ordered a bunch of improvements to the home but never paid the bills. The contractors then put liens on the home and now these bills are your responsibility. Such terrible situations get prevented with the title search.
Who performs the title search and how much does it cost?
Title searches are usually performed by title insurance companies such as ANSTitle. Experienced title agents are able to quickly locate all property records, analyze the information, and prepare a title report summarizing their findings. If you’re financing your home purchase, your lender will order the title search in preparation for your closing. Title searches, however, can be ordered by anyone interested in a particular property.
Individuals can also conduct title searches on their own, however, the amount of documentation and the process of obtaining and sifting through all of it can get pretty complex for the typical homebuyer. While you may save a few hundred dollars, you are taking the risk of missing a critical piece of information that can cost you a lot more down the road.
New York title insurance companies charge between $150 and $500 for a basic title search. The bill is typically added to the closing costs and paid together with the other fees and charges.
What is the title search process?
Once the title search has been ordered, the agent will begin examining all available public records for the home. They collect documentation from local courthouses, recorder’s offices, tax collectors, and various other sources. Some of the records they use to gather information include:
- Land records
- Family court records
- Bankruptcy records
- State and local tax liens
- Financial judgments
The process can take from a couple of days to a couple of weeks, depending on such factors as access to digitized documentation and the complexity of the particular property’s title history. In general, newer homes tend to have their title search completed faster due to the shorter history of transactions involving the property.
What happens after the title search is completed?
There are a few things that happen after the title search is completed and before the closing can proceed:
Preparing the Title Report
After the agent reviews all available property records, they prepare a title report, which summarizes their findings in an easily digestible format. The report will include a chain of title – the complete history of ownership transfers for the subject property. It will also document any liens, past due taxes, mortgages, and easements impacting the title.
Some of the most common issues affecting titles include:
- Property tax liens – a lien placed by the local tax assessor for outstanding property taxes;
- Mechanic’s liens – another type of lien, which can be the result of unpaid contractor bills for work done on the property;
- Lender’s liens – liens placed by banks for unpaid mortgages and home equity lines of credit (HELOC);
- Deed errors – errors that occurred during the recording of a past sale of the property;
- Easement issues – the rights of a neighbor or a utility company to use a portion of the property;
- Incorrect boundaries – poorly done land surveying resulting in inaccurate calculation of the property limits.
Clearing the Title
If there are no defects, the title is considered “clear” and the home sale can proceed without any issues. If, however, the title search uncovers any unresolved claims, liens, or other encumbrances, they will have to be resolved before the transaction can be completed. Typically, it is the home seller’s responsibility to clear the title.
Obtaining Title Insurance
Even though title agents make every effort to discover any and all existing title defects, sometimes, there may be an issue that is simply unknown at the time of the search. That’s why homebuyers are also required to purchase title insurance. This policy will cover the cost of mitigating any claims brought against the property for as long as you own the home.
It’s important to understand, however, that your title insurance policy provides coverage only for events that have occurred prior to you purchasing the property. You can’t use your title insurance to cover liens that were filed against the home under the current ownership.
The title agency that completed your title search can also issue your title insurance policy and, in most cases, will also handle your closing. If you’re currently looking for a title insurance quote in NY or NJ or an escrow agent to handle your closing, give our agents at ANSTitle a call. We have over 50 years of combined experience in title insurance and transactional real estate.
Running a title search on your future home and buying a title insurance policy to guarantee the title are two of the most critical steps of the homebuying process. Without these safeguards in place, homeowners can suffer huge financial losses and even lose their homes. The one-time premium you will pay for your title insurance policy will be well worth the peace of mind of knowing that your ownership rights will be protected for as long as you own the home.