The All Important Title Search

Like any major purchase, real estate sale and refinance transactions generate a significant amount of documentation. From the initial purchase contract to the loan application, appraisal, flood report, mortgage, closing disclosure and title & homeowner’s insurance policies, the purchaser/ borrower is flooded with documentation. While each piece of information collected is critical to the sale or refinance transaction, it is the title search that is arguably the most important document for all parties involved. Yet the title search is rarely mentioned in discussions pertaining to real estate related documentation. With this blog, we’ll break this trend and look at the key reasons why a title report is so important.

Who Owns the Property

Whether you’re a Realtor, Lender or purchaser, knowing that the person who claims to own the property is in fact the person who does own the property is a vital piece of information. Is title vested in the name of your seller? Does your borrower have the right to mortgage the property? Are you buying the property from the rightful owner or a conman trying to make a quick buck? These questions are answered by the title search. In searching the land records, the title searcher will be able to determine the correct legal owner of the property. Or, as may be the case from time to time, uncover any issues or problems relating to how the property was transferred from owner to owner. With a growing number of properties that were foreclosed last decade coming back on to the market today, we are noticing an increase in the number of faulty Foreclosure Deeds. These types of issues are only exposed in the title search.    

Potential Liens and Defects

When purchasing residential or commercial property, buyers want to make sure that sellers are conveying clear and marketable title. That is, the property is free of liens and defects. Likewise, the lender want to make sure that no one else has a claim against the property that is being used as collateral on their loan. This information is provided by the title search. Outstanding mortgages, judgements, tax liens, water and sewer liens and mechanic’s liens are a few of the encumbrances that a title search can uncover. These encumbrances can have a direct impact the marketability of title and the lender’s ability to claim a first lien position on the property. For obvious reasons, encumbrances must be corrected or addressed prior to closing the sale or refinance transaction.     

What Are Your Buying

Know what you are buying is good advice, specifically when it comes to real property. Is access to the property via a right of way? Do adjacent properties have a right of way over the property you’re are purchasing? Does the driveway encroach on the neighbour's property? While sellers are likely to tell you the property lines are from “that tree to the corner”, only the property’s legal description truly describes the property you are buying.  This legal description along with any right of way access issues are included in the title search.

The lack of attention paid to title searches can be attributed to their importance to all parties in the real estate transactions. For there is little reason to argue the merits of a process that has been in use for a couple hundred years and continues to benefit all involved in the transaction.