Things you need to know about property titles

Family in the living room of their home.

One of the steps in buying a home is to have a title search completed prior to closing. Many first-time buyers may not have heard much about this process. A title search is performed to ensure that the property title is clear and that there are no unexpected surprises.

While most home purchases are completed with very little hassle, some may involve issues with the title. Although most are minor problems and easily resolved, it is important to understand what to expect.

What is a property title?

At its core, a property title is a legal document that proves ownership of a specific piece of property. It contains detailed information about the property, its boundaries, any liens or encumbrances, and most importantly, the owner’s name. Think of it like a birth certificate but for your house or land.

When you purchase a property, the title is transferred from the seller to you, giving you rightful ownership. It’s crucial to make sure that the title is clear and free of any claims or disputes before completing the purchase. You wouldn’t want any surprises popping up later, right?

What is a title search?

To ensure the status of a property title, a title search is conducted. This involves a thorough inspection of public records to uncover any potential issues, such as outstanding mortgages, unpaid taxes, or legal claims against the property. If any problems arise during the title search, they typically must be resolved before you can proceed with the purchase.

Once the title search is complete, and you’re satisfied with the results, you’ll have the opportunity to purchase a title insurance policy. This policy offers protection against any future claims or defects in the property title. It’s like having a safety net that guarantees your investment, should any unforeseen issues arise down the road.

Purchasing title insurance for your property

Once you are under contract on a house, one of the first things you will do is buy title insurance. There are two kinds of policies:

Owner’s title insurance – protects the buyer
Lender’s title insurance – protects the lender

An owner’s policy provides coverage equal to the amount you are paying for the property. It protects the owner if a problem is discovered after the search is completed. The insurance company provides legal assistance and pays any valid claims. Paid at closing, this type of policy provides protection for as long as you own the home.

Although you will have very little involvement with the actual title search or resolution, it’s important to consider having title insurance. Understanding the process can give you peace of mind through the home-buying experience.

Prior claims to the home title

A title investigator looks for any claims to the title that may affect your purchase. The search will include public records and other land records spanning many years. Here are a few examples of the most common issues:

Previous owner failed to pay state or local taxes
A contractor was not paid for work completed
Mistakes or omissions in deeds
Forgery
Undisclosed owners, heirs or conflicting wills

Resolve issues with the property title

If it is discovered that the seller of the home you wish to purchase has ownership with another party, then all owners must sign the closing documents before the sale can be completed. Outstanding judgments or delinquent taxes must be paid at closing before a clear title is received. The seller has the responsibility for resolving any issues with the title.

A title search also provides information about easements, restrictions and rights-of-way that could limit your use of the property. Review these documents prior to closing to ensure that you understand any potential impact.

What to do with a house title

Once you are the owner of your new home, place your title in a safe place, such as a safe deposit box at the bank.

What happens to the property title when you sell

When you sell your property, your title ownership is transferred to the buyer. That party will receive a copy of the new title a few weeks after closing, indicating that they now own the property, and you no longer have any claim to it. The title that you hold is now invalid.

What to do if you lose your title

Loss of your title is no reason to panic. You can go to the clerk’s office at the county courthouse where the property is located and request a copy. If you have a mortgage on the property, your mortgage banker should also have a copy on file.

For a first-time homebuyer, a title search is often just one more new task in the unfamiliar and possibly confusing process. If any title issues arise, it can cause stress and anxiety. Remember to stay calm - while title issues may delay closing in some cases, they typically don’t cause lasting effects if they are resolved appropriately.