Of all the things that have been deemed important to real estate investors and home buyers over the course of a transaction, none may carry more weight than the title report. At the very least, the title report is specifically designed to disclose a property’s most important information: everything from the rightful owner and vesting interests in the property to the details of liens, encroachments, or easements. It is safe to say the information contained in a property’s title report is important to familiarize yourself with and necessary.
Title reports are, after all, the best and most efficient way to ensure a property is free of defects — legally, defects refer to “anything attached to the land, such as another person’s rights, that could affect how you use the land or decrease its value,” according to Rocket Lawyer. The last thing you need to worry about buying a home is whether or not you are the rightful owner. That said, do yourself a favor and get a title report before you close on a deal; it could be the smartest decision you make.
What Is A Title Report?
A title report is a document that outlines the legal status of a property and related information on its ownership. Several key components must be included in a title report. This includes information on the county, zoning laws, property value, and current tax information. Title reports will also feature a full, legal description of the property. In many cases, a sample title report will include paperwork on the chain of ownership, unreleased or open mortgages, judgment dockets against prior or current owners, and supplemental information within the scope of the search. For a full title report sample, be sure to read this example provided by Free and Clear.
What To Look For In A Title Report
Title reports are helpful because they can help you discover any issues that can impact the transfer of ownership. Here are some common title problems that come up:
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Public record errors: Be sure to comb through the deed, as clerical or filing errors can occur. Administrative errors can affect the validity of the deed.
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Liens on the property: An outstanding lien means that the property could be used as collateral for outstanding debt of the previous owner. Find out how a warranty deed is a great tool to protect yourself in this possible scenario.
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Encumbrances: An encumbrance won’t prevent the transfer of property ownership, but it means that a third party has an interest or liability on the property. This can diminish the value of the property.
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Falsified documentation: Believe it or not, some individuals will go through great lengths to falsify documents. This means that some public records may contain false documents, making it difficult to discover the rightful ownership of a property.
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Estate plans: In some cases, an unknown heir or will can be discovered. A newly-discovered estate plan can jeopardize future property ownership.
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Property disputes: Public survey plans might show different property boundaries from what was promised. This may cause disputes regarding property lines and value.
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Falsified identity: Legal claims to a property can be at risk in the case that someone impersonated the true property owner to sell the home.
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Violated building codes: Titles can sometimes be affected by unresolved building code violations.
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The Three Schedules
Title reports are generally divided into three sections: Schedule A, Schedule B, and Schedule C. Each portion contains specific information. It can be helpful to understand what you’re looking before reviewing an official report. Schedule A, typically the first portion of the report, includes information on the current owners and type of land interest. The beginning of the document will also outline the scope of the title search and title insurance.
Moving on to Schedule B, the next section will outline any claims, liens, or interests in the property outside of the owners. These features, called encumbrances, do not always prevent the title transfer but could signal some ownership rights. For example, this is where mineral rights associated with the property would be discussed. Schedule B includes any exceptions to the property ownership, such as HOA bylaws or easements against the property. Schedule C is relatively simple and includes a legal description of the property. The description will vary depending on the local jurisdiction, but generally describes the lot and block as well.
How To Get A Title Report For A Property
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Gather information about the property with the records you do have
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Go to the local courthouse and search through property deeds
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Try to establish a chain of ownership for the property
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Visit the County Assessor for more help on locating the actual title
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If you still do not have the records, ask your network for a reliable title officer
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Work with the title officer until you have the documents you need
It is entirely possible to get a title report for the property you intend to buy on your own. However, title reports are complicated, and those that aren’t well-versed in the language offered in each report may as well be reading another language. Suppose you are confident in your ability to read a title report. In that case, there are two things you can do to glean more information on the property in question: visit the property’s local courthouse or County Assessor.
Courthouses contain a wealth of information on local properties, not the least of which includes chains of title and deed information. That means there’s a good chance your property’s information can be found a few blocks away if you know what to look for. Better yet, this type of title search is free.
In addition to the courthouse, the County Assessor could have what you are looking for — for free, nonetheless. Most states now have additional tools available for free property title searches, and there’s a good chance it is stored at the County Assessor’s office. Just know this: the information isn’t always complete, so take what you glean with a grain of salt.
While it’s easy to take the free route, I don’t recommend doing so unless you are completely confident in your ability to decipher records without error. While visiting your courthouse and Assessor can net you some great information, these methods are only reserved for professionals. I recommend working with a professional for those of you who are less well-versed in conducting title searches.
If you don’t know how to get a title report for a property you are interested in buying, I highly recommend hiring a title officer. As the name would lead you to believe, a title officer is someone that has been professionally trained to identify the defects of a home — again. Defects are those discrepancies that could call a home’s true owner into question. Otherwise known as a title agent, title officers are responsible for confirming whether or not a piece of real estate is, in fact, legitimate and that there are no issues with its title. In doing so, title agents will investigate the status of a property over the course of an impending real estate transaction, ensuring the buyer of exactly what they are dealing with. That way, buyers can commit without the threat of ownership issues appearing in the future.
Real Estate Title Report FAQs
Dealing with courthouse records, deeds, and title officers may not be what you had in mind when purchasing a property, but it is a crucial step in the process. Rather than being overwhelmed, take time to prepare yourself for a title search by learning how it works. Even if you have experience with title reports, it is still good to brush up on the process. Read through the following frequently asked questions below and make sure you’re prepared for the next property you intend to buy.
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What is a preliminary title report?
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Where do you find the preliminary title report?
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How do you order a title report?
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How do I run a title search?
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How long does title work take?
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What does a title search cost?
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Who pays for the preliminary title report?
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What’s the most important part of a title report?
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What is title insurance?
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How do you find a good title company?
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What are common problems when buying a house?
What Is A Preliminary Title Report?
A preliminary title report is essentially an official document that establishes ownership of a property. It will detail the conditions of the title insurance that will be issued to the buyer. It will include a detailed description of the property, any liens or debts on the property, and any limited uses of the property. A preliminary report allows the buyer to remove any items in the report that the buyer finds unacceptable before they actually purchase the property.
Who Provides The Preliminary Title Report?
The listing agent typically provides preliminary title reports. According to Redfin, “an attorney or title company will review the home’s title to look for any problems that might prevent the home from being legally sold.” Therefore, their findings are written up in the form of a preliminary title report and given to the impending buyer.
As their names suggest, title reports represent the official documentation of a home’s history of ownership. In other words, a title report is a fancy way of identifying a home’s previous owners. A complete report will document many more things than previous owners — liens, encroachments, and easements, to name a few.
Preliminary title reports are usually given to buyers within a few days of reaching an agreement with the seller to buy the property
How To Order A Title Report?
To order a title report, buyers can enlist the services of a title company. There are plenty of reputable title companies ready and willing to perform a title search on any particular property. Look under “title search” in the Yellow Pages or type a similar search online. Either way, it should be relatively simple to find a trustworthy company willing to investigate a property’s title in question.
If you would rather not hire a company and, instead, do the title search yourself, take a trip to your County Assessor’s office or courthouse. You can find a great deal of information on the property at these locations. In some cases, the records provided by a courthouse may not be complete. As I already alluded to, performing your own title search can carry massive implications. I recommend leaving this particular task up to a professional.
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How Do I Run A Title Search?
Again, the easiest and safest way to run a proper title search is to enlist a title company’s services. The title company will assign a title officer to anyone that inquires about a property, and it’s their job to investigate the status of a home. In other words, title officers will do all the work for you if you hire them. What’s more, working with a title officer will also award you the opportunity to acquire title insurance.
If you are inclined to conduct your own title search, you will first want to head down to the closest courthouse or the one you have identified to be holding the subject property’s title documents. Once there, ask the clerk which direction the title information is stored (navigating some courthouses can be confusing and time-consuming, so don’t be afraid to ask for direction). After you have found your way to the courthouse area holding the title information, you will either have to request the info on a specific property from another clerk, or you may have to go through the different papers by hand. Each location will have different procedures.
At this point, you will want to pay special considerations to anything and everything regarding past ownership. In particular, take diligent notes on past transfers of title and anything that may look questionable. After visiting the local courthouse, plan a trip to the County Assessor’s office. Otherwise known as the County Clerk, a County Assessor could have additional tools for uncovering chains of title and deed information. While time-consuming, this method is completely free.
How Long Does Title Work Take?
Title work typically takes around two weeks, though it can vary. The amount of time it takes to gather information to put together a title report is entirely dependent on the person gathering the information. More often than not, an attorney or title officer can get the information to a buyer a few days after agreeing with a seller. However, inexperienced buyers could take much longer to gather the information they need if they decide to neglect a professional’s services.
How Much Does Title Work Cost?
Title work will typically cost around $100. The cost of a title search isn’t all that expensive, especially when you consider the cost of everything else over the course of a real estate transaction. However, it is worth noting that the title search typically comes with title insurance. As its name suggests, title insurance will ensure the title search results. “If any claim is brought against the property as a result of a pre-existing problem with the title, title insurance can cover the expense,” according to Financial Web. Not surprisingly, title insurance will come at an additional cost. According to the Federal Reserve, “a lender’s policy on a $100,000 loan can range from $175 in one state to $900 in another.”
Who Pays The Preliminary Title Report?
The buyer will typically pay for the preliminary title report. This is because the preliminary title report’s cost is typically included in the closing costs. There are, of course, exceptions, and just about everything can be negotiated, but for the sake of this article, buyers are going to be expected to pay the closing costs (which will include the title search/report).
What Is The Most Important Part Of A Title Report?
3 crucial sections must be reviewed thoroughly in the preliminary title report. They include the legal description, property taxes, and mortgage liens. The legal description will mention where the property is located, how it is zoned, and the lot’s boundaries in relation to nearby streets. This section should be specific and accurate; review it with your real estate agent if you have any questions.
According to Edith Reads, a professional investment writer, stock trader, and personal finance coach, “in short, title reports provide peace of mind and help protect your investment. So it’s definitely worth taking a close look at them before you sign on the dotted line”.
The property tax information will establish whether or not there are any taxes owed on the house. To ensure the sale of the property, any taxes must be settled. In other words: you cannot purchase a home with outstanding taxes. Following this information, a title report will outline mortgage liens. These will be listed in descending order, with the largest lienholder at the top of the list. Other information will be included in a title report, but reviewing these three sections is a good way to start.
What Is Title Insurance?
Title insurance protects the owner (or lenders) against any problems that may arise over the property’s legal ownership. Title insurance can be broken into two main types, the owner’s insurance and lender’s insurance. Owner’s insurance will protect you (the buyer) from any ownership disputes, while lender’s insurance will protect the bank that financed the home. For example, if you purchase a property and someone else turned out to be the rightful owner, title insurance would pay back the home’s value.
While title disputes may not be widespread, it is always a good idea to protect yourself from any potential issues. If you work with a title officer on finding a property, it will typically be offered at the time of the preliminary report. When purchasing a property or other large asset, it is always a good idea to make sure you are protected if any issues arise.
How Do You Choose A Title Company?
To choose a title company, you can either ask around your network or search online for your market area options. Once you have a few options in mind, be sure to look for customer feedback online. A title report is crucial to the sale of a house, so make sure you find someone you can trust to get the job done right. While it may be tempting to work with the first company you see, mind your due diligence and search for options. Feel free to reach out if you have any questions for a potential title officer. After all, they are there to help.
What Are Common Property Title Problems When Buying A House?
Several issues have the potential to show up on a title report, but some of the most common are those outlined below:
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Liens: A lien is a legal claim of ownership listed on the title of a home. It is worth noting that anyone owed money by a homeowner can file a lien on a home. This includes utility companies, contractors, and tax departments.
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Easements: Easements represent another person’s right to use the land for a specific purpose. While not as common as liens, and in some cases not as threatening to the sale of a property, buyers should still keep an eye out for easements.
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Encroachments: As the term suggests, encroachments identify pieces of property that encroach on other people’s land. That means the property you are looking to buy might overlap with another person’s land or vice versa. Either way, a title report will bring these issues to light.
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Covenants, Conditions, & Restrictions: If the property is located under the jurisdiction of a homeowner’s association, there will be certain bylaws the property is subject to. Potential buyers should be made aware of these early in the buying process.
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Historic Oversights & Requirements: Properties located within historic or protected districts will have certain restrictions about the upkeep of the home. Homebuyers will typically be aware when buying a property located within a historic area; however, these rules will still show up on a title report just in case. Potential buyers should consider these carefully, as they are typically set and regulated by a local committee.
Getting Help From The Pros
Many homebuyers are unsure of what to make of a title report. Despite the common title problems listed above, it can still be challenging to know exactly how to proceed once you have the report in hand. Reach out to a professional, whether that be your real estate agent or an attorney with any questions. They will be able to walk you through the right way to proceed. In some cases, title problems can be quickly resolved with the help of the seller. In others, you may need your agent’s help to walk you through the title contingency clause included in the offer. Either way, always reach out with questions when reviewing a title report.
Summary
Whether you are a first-time homebuyer or a seasoned investor, knowing what you are getting into when purchasing a property is crucial. That’s exactly what makes a title report so important: it outlines everything you need to know about owning the property. Always mind your due diligence during the closing process and request a title report. Further, read through the above questions to make sure you know what you are looking for when you get one. By taking the extra step to learn how a title report works, you can help avoid potential problems down the road.
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