Ready to Buy? A Title Search Belongs on Your Checklist

A title search is one of the key steps in protecting your ownership interest when you buy a home. It reviews the property’s recorded history to uncover issues that could affect the deed, the seller’s right to transfer the property, or your ability to sell the home later.

In a typical purchase, the title search is part of the title company’s work before issuing title insurance. The search helps confirm that the seller has the legal right to sell the property. It can also reveal liens, claims, unpaid debts, recording errors, easements, or other problems connected to the title. If a serious issue is missed, the transfer could become disputed and may even lead to legal action. Owner’s title insurance can provide added protection if certain covered title problems appear after the sale.

Do It Yourself, or Hire a Professional?

You can do the basics yourself. But as you might imagine, sometimes it’s easy to miss impactful things. Almost all home buyers assign the search to a title company, closing attorney, or abstractor.

The title search takes place once a purchase agreement is signed. Depending on state and local norms, and what the purchase agreement says, costs might be covered by the seller or buyer. A buyer should look for the title search fees among the listed closing costs. 

Through a warranty deed, which is commonly used in a sale, the seller makes a legally binding promise that the title is clear. This promise relies on a title search. A warranty deed does not make title insurance unnecessary. Explore more about the difference between a warranty deed and title insurance.

What Exactly Is Being Searched?

The search traces the home’s ownership history. This starts with an abstract of title. The abstract provides a detailed history of legal claims in the title records.  

The public records related to the property will include the current and past deeds, recorded loans and liens for debts, property tax records, judgments against the property, and any restrictions on the buyer’s ability to use the full property.

The methods include pulling up digital records kept by the county. Visits to the county recorder and other agency offices connect the title professional with physical documents.  

Some of the documents are easily spotted. Some are harder to discover.

What Issues Can a Title Search Expose?

Common unresolved issues to be found include:

• Tax liens or construction liens, HOA liens (for association fees and penalties) or other debts, such as second mortgages that have yet to be fully paid off.

• A permit or easement on the land that must be reserved for others’ access, or other restrictions on an owner’s use of the property. These might include, for example, local ordinances barring a home-based business or Airbnb-style home sharing, or prohibiting an additional housing unit from being installed on the property.

• Mistakes in the language of the deed.  

• A pending divorce or legal action that could place a judgment on the home.

• Mismatches in surveys among neighboring properties.

• Outstanding permit violations.

And so forth. But it’s possible that some will slip through the cracks of a search.

A title search is not foolproof. For one thing, changes to a title can happen due to long-time patterns of uses that weren’t recorded on the title. For this reason, an owner’s title insurance policy can turn out to be an excellent investment. There’s a one-time premium at closing. Ask your real estate professional or lender for more information.

Will the Title Search and Report Hold Up the Sale?

A title search can take two weeks or more to complete.

If title problems are detected, the title report can slow down a sale. It could even result in the parties setting aside the purchase agreement.

What activity goes on while the parties are getting ready to close the deal?

• An owner’s debts that have attached to the property must be resolved, so they don’t become the buyer’s responsibilities.

• The buyer would need to decide whether to go ahead with the deal if previously unknown easements or restrictive covenants turn up in the search.

So, the title report can prompt negotiation. Before closing, the buyer needs to be sure debts or document errors are resolved. Gaps in the title or missing heirs need to be ruled out or resolved. The buyer will have the option to rethink the deal if problems can’t be remedied.

Does a Cash Buyer Need Owner’s Title Insurance?

Yes. Perhaps especially so. Here’s why.

If you get a mortgage, the lending company will expect you to buy a policy—with the lender as beneficiary. So, the lender’s title insurance policy safeguards the lender’s possible losses related to title claims or defects, that can slip through the cracks in the initial title search. That protects the lender’s stake in the home during the time the mortgage continues to exist. Take that as a message for buyers—whether they be cash buyers or borrowers. An owner’s title policy sticks with the title, even after the final mortgage pay-off.

So, title insurance is optional for buyers, but nevertheless important. Mistakes in recorded documents and other problems could lead to a court case, which the policy may cover. The policy may also reimburse the deed holder for restrictions that are found after the deal.

If you get a title policy for your own benefit, you can select a particular company—or you can go with the same company the lender uses, as most people do.

Some states regulate title insurance costs. In Iowa, the state provides home buyers with title protection. But in most states, buyers are on their own. They might shop around, or go with the company that issues the lender’s policy. Speak with your real estate pro in advance if you plan to work with an insurer you select.

Does Title Insurance Do Anything to Prevent Title Fraud?

The answer depends on the choice between a standard policy and an extended policy. An extended policy covers issues that a standard policy doesn’t. The deed holder can also get extended coverage to address potential fraud, forgery and scams during the term of ownership. 

Choosing the expanded coverage can also protect the deed holder with regard to a wider range of legal needs, and even zoning-related concerns. Encroachments that happen over time may also be covered.

Ask a title agent what’s available.

What a Buyer Must Know: The Title Search Is Essential

You’ll want to guard the investment you make in a deed. And it all begins with a title search.

Records to be searched may be stored online, and in courts and government offices. Each state and county has a particular system. Fear not. Experienced title professionals are used to navigating it.

Important note: This article is offered for informational purposes only. It is not legal advice. Legal questions involving titles are case-specific, and should be answered by a licensed attorney in the state where the property exists.