What Is a Title Search in Real Estate?
The property title search is a standard part of closing. Its purpose is to confirm the seller's legal right to sell a property. For buyers, conducting a title search prevents the unwanted surprise of someone showing up with a claim or lien on your new property!
Why Do I Need a Title Search?
A title search is an examination of public records to confirm a seller's claim that they are the legal owner of a property. It also confirms that a property is free of liens or ownership claims. If a property has claims or liens, they'll show up in a title search. By conducting a title search, you'll protect your investment against a potential legal dispute.
Difference Between Deeds and Titles
While related, deed and title are actually two different things. A home deed is a legal document that is filed when ownership is transferred. As a buyer, you should receive the deed either at or immediately following closing. Deeds are filed at local courthouses or assessor offices.
The title is the "execution" of legal ownership granted to a property owner by a deed. Titles cover claims to several property-related rights that include the right to own and use the property. Titles also encompass all prior transfers and uses of a property.
Both title and deed are necessary in a home purchase. When you receive a property's deed in your name, the legal transfer also grants you the title.
How Do Title Searches Identify Who Owns a Property?
What is a title search on property used for? Title searchers are historical searches that show all ownership and legal records associated with a property. By pulling up all documents on record, a title search expert can say with confidence whether a property is legally cleared to be sold or not.
Who Performs It?
The responsibility of running a title search typically falls on the buyer. Lenders usually require clear title searches before they can approve mortgages.
The Process
Public records are examined in order to pull together all available legal documentation for a property. This information is used to prepare something called an abstract of title, which covers all ownership records and transactions tied to a property. Findings that are reported include:
- Previous owners
- Past surveys
- Easements
- Wills associated with the property
- Lawsuits associated with the property
- Financial rulings against the current property owner
- Liens against the property
- Outstanding claims for the property
- Outstanding property taxes
- Construction liens
- Probate cases
- Deeds
The Findings
In most cases, the title search will come back with "free and clear" ownership. That means that the buyer and seller can move forward with closing. If the title search uncovers a claim, lien, or some other hindrance to a successful property transfer, the buyer and seller must work together on a case-by-case basis to either resolve the issue or walk away from the deal.
If the issue is an unpaid property tax bill or overdue utility bill, the seller may be able to resolve the issue quickly by simply paying what is owed. However, an easement issue or ownership dispute could be enough for a buyer to back out.
Who Conducts the Title Search?
Title searches are performed by title companies or attorneys. While the records needed for a title search are generally available at a courthouse, assessor's office, or recorder's office, it's best to leave the title search to a trained professional to ensure you don't overlook anything!
How Long Does a Title Search Take?
While timelines vary from property to property, title searches take 10 to 14 days on average. A title search should be performed at some point between when a buyer makes an offer and the formal transfer of ownership at closing.
Old Vs. New Homes
Title searches for new homes can sometimes be completed in hours. With older homes, the process can take longer because the professional performing the search will do their due diligence to collect and review all the records associated with a home over the years. Factors that can influence the timeline include:
- The availability of documents pertaining to a home
- A home being sold many times over the years
- A home belonging to land that has been subdivided over the years
- A home being involved in any kind of lawsuit or tax lien
- Past property disputes
- An owner going through a divorce, bankruptcy, or foreclosure
Cost of a Title Search
What is a title search in real estate costing these days? It's important to factor the cost of a title search into your closing costs when tallying homebuying fees. While title search fees can vary by location and service provider, the cost of a title search ranges from $80 to $300 around the country. Included in the cost of the title search is an easy-to-read report documenting all the findings.
Title companies also generally charge an extra fee called a settlement fee. Also known as the closing fee, the settlement fee's purpose is to cover administrative costs tied to participating in your closing. This includes survey, notary, and escrow fees. Fees vary by provider. In some cases, no extra title fees are applied to your closing costs.
There's another very important charge that's separate from a title search fee. This charge is called the title insurance premium. Title insurance protects a homeowner against financial loss stemming from title defects or claims against a property that they were not made aware of through the title search.
Title insurance involves a one-time fee called a premium that is paid at closing. Title insurance policy costs vary based on the size of the mortgage. In general, title insurance cost is anywhere from 0.5% to 2% of the home purchase price.
Can I Do My Own Title Search on My Property?
While it is perfectly legal to conduct your own property title search if you want to boost home affordability by cutting fees, most experts advise against this decision. Collecting full documentation without training and experience can be difficult. Trying to understand and interpret records without a legal or real estate background can be even more difficult. Here's a look at the pros and cons of hiring a professional versus conducting your own title search.
Hiring a Professional
Pros:
- Provides peace of mind because the search will be done by experienced professionals.
- Your title search company will provide you with a clear report that you can present at closing.
- Can be done as speedily as possible.
Cons:
- Requires a fee.
Doing Your Own Title Search
Pros:
- Can be done for free.
Cons:
- Having an untrained eye means you may overlook major issues with a title.
- May require you to spend time driving to different courthouses or records offices.
- A DIY title search won't be accepted when purchasing title insurance.
- Your mortgage company may require you to have a professional title search done.
