What Does Doing a Title Search Mean?

When you have the money to buy a house, it doesn’t mean that you can close as soon as the buyer agrees to sell it to you. Several steps need to be taken before the sale of a home to ensure that everything goes smoothly. One of these steps is a property title search. Read on to learn what a title search entails and why it’s essential to obtain title insurance when buying or selling a home.

What is a property title?

A property title is a person's or group's legal right to that property. While titles are usually associated with real estate, they can come with other large purchases. If you own a car, boat, or motorcycle, you already have a title permitting you to use and sell it legally. A title for a home follows the same principle, just for a much bigger type of property.

Is a property title the same as a deed?

While the terms “title” and “deed” are often used interchangeably, there is a slight but notable difference between the two. A deed is a physical document proving ownership, whereas a title is the abstract concept of ownership. You can ask someone to show you the deed to a home, but you can't ask them to show you the title.

What does doing a title search mean?

A title search is an investigation carried out before the sale of a home. It determines whether the seller legally owns the house and has the right to sell it and checks for any issues that may prevent or hinder the sale of the property.

A title search researches matters including, but not limited to:

• The complete list of people who have owned the property throughout its history
• If there are any legal issues making it unclear whether the current owner does, in fact, own the property
• Whether any liens have been placed on the property, and if so, if they have been satisfied
• Whether all documentation relating to the property is free of errors and fraud

Why are title searches necessary?

It's essential to carry out a title search before a home sale takes place. Even if a home's current owner is not knowingly doing anything dishonest, there may be baggage attached to the property they are unaware of, maybe dating back to previous owners. A title search protects the buyer from accidentally purchasing a home that may cost them several thousands of dollars in legal expenses.

Do I absolutely need to have a title search?

Conducting a title search is not only crucial for safeguarding yourself against potential hurdles in the home buying process—it's necessary if you want a mortgage. Lenders need to know that they won’t be losing money over ownership disputes or debts, and without a title search, they have no evidence that issues won’t come up. That means a buyer needs to have a title search done before a bank will agree to lend them money for a home.

Who performs a title search?

While a title company usually performs title searches, there are no legal limitations on who can and cannot do a title search. That means that a buyer who feels confident in their legal knowledge can do a title search independently, although it will take a considerable amount of time and effort. We highly recommend you leave title searches to professional title companies to best ensure any and all potential issues are found.

How do you find a title search company?

While there is no shortage of title search companies, it can be challenging to determine which are the most reliable. One of the many reasons it's best to use a real estate agent when buying a home is that they can refer you to reputable title search companies. You may also be able to get a recommendation from your mortgage lender or real estate lawyer.

What sources does the title company use to determine home title issues?

A title search company consults various sources to check a home's background. They examine deeds, county land records, tax liens, court cases (such as divorce or probate cases that involve inherited homes), bankruptcy records, and financial judgments to determine whether there are any issues with a property.

How long does a title search take?

While there is no guarantee that a title search will be done in a set amount of time, you can usually expect the process to take approximately 10–14 days. Naturally, the more complicated a title search is, the longer it will take to complete. Older homes tend to have more legal records to search through, so they typically take longer. There may also be delays if one or more of the offices responsible for sending documents to your title search company is slow to do their job.

What happens after a home title search?

Upon completing their research, the title search company will compile their findings in a summary called an abstract of title. An abstract of title lays out the history of all the home’s title transfers and the existence of any encumbrances on the property. This provides the buyer and their mortgage lender with all the essential details regarding a home's ownership.

Who pays for the title search when selling a home?

While there is always room for negotiation, it is customary for the seller to pay the majority of closing costs associated with purchasing a home. This includes paying for the title search, which typically costs between $75 and $200. However, this can also be dependent on the type of market the home is in. If there is a low inventory of homes creating what is known a seller's market, it is not uncommon for these costs to shift to the buyer in sales negotiations.

How long does it take to close on a house after the property title search is performed?

If a title search comes back clean with the title company offering an insurance policy (title commitment) to the buyer that the title search was completed and title is clear, and all other steps of the mortgage process—including pre-approval, verification of funds, and appraisal have been completed, a mortgage lender can take anywhere from a few days to a few weeks to give the buyer their final seal of approval. How long it takes to get a mortgage approved depends on how quickly the lender works and whether they need any additional information from the borrower. After receiving final approval, you should be able to close in about a week.

What if the title search reveals a problem?

Sometimes a title search will reveal a defect, known by professionals as a “cloud on title.” Clouds on title, including liens, easements, foreclosure, fraud, lawsuits, and probate issues, may vary in severity. While some problems may be easily resolvable and result in nothing more than a delay in closing, others may make the home purchase unviable. If a cloud on title arises, it’s best to consult with your real estate agent and lawyer before you decide to proceed with the purchase.

What happens if a title search misses something?

Title search professionals are human, and there is always room for error no matter how good they are at their job. If you discover too late that a title search failed to uncover an important issue, you can get stuck paying pricey legal fees. This is why it's essential to invest in title insurance before buying a home.

Title insurance protects both you and your lender if your title search is found to be inaccurate. While the exact situations covered may vary from one policy to another, you can expect a basic policy to defend against ownership disputes, outstanding lawsuits or liens on a property, and improper record-keeping.

What is a “bundle of rights” surrounding a property title search?

Whenever a home’s title is transferred, the new owner is guaranteed a set of powers known as the “bundle of rights.” These rights include:

1. Right of possession:

   The property legally belongs to you from the moment you purchased it until the moment you sell it.

2. Right of control:

   As the property’s owner, you can decorate or modify it as you please, as long as you are not breaking any laws or rules set by your homeowners association.

3. Right of exclusion:

   You may choose who can and cannot enter your home or yard.

4. Right of enjoyment:

   As long as you comply with the laws of your area and rules of your homeowners association, the activities you engage in on your property are your choice.

5. Right of disposition:

   Provided that you do not have any liens on your property, you are permitted to sell it.

Do you need to perform a title search on vacant land?

Just because a plot of land doesn’t have a building on it doesn’t guarantee that someone else legally owns it. Even if you are buying vacant land to build on, your mortgage lender will still require that you have a title search done beforehand to ensure that no ownership disputes come up.

Do you need to do a title search on a manufactured or mobile home?

Mobile homes, also known as manufactured homes, can come with encumbrances just like a traditional home. To avoid any legal problems later on, you will need to have a title search conducted before buying this type of home, as well.

Can you do a property title search online yourself?

While many parts of the US enable a buyer to do their own title search on the official website of their county assessor, it is advisable to leave title searches to the professionals.

Legal documents tend to contain tricky language, and attempting to do a title search on your own puts you at risk of missing something important. The money you pay a title search company to carry it out for you is well worth the peace of mind that you won't miss something that will cost you a lot more money later on.