There are a few scenarios in which you would likely have a title search performed on a home. Most of the time, title searches are done when a buyer is buying a home. In other cases, potential buyers, most often investors, may do a title search prior to making an offer in order to determine the number of liens on a property. This is done in the event a buyer is planning to bid on a property in foreclosure and wants to assess what liens they may be responsible for paying off in addition to the amount of the bid.
What is a title search and do I need to get one when buying a home?
A title search is the process in which a search is conducted on the history of a property to determine ownership interests and regulations concerning that particular property.
When you are purchasing a property you DO need to get a title search and will be required to do so if obtaining a mortgage. Title searches are done in order to determine the following:
- Does the seller own the property and are they authorized to sell the property?
- Does the home have any restriction or allowances? This would be determined by documents such as covenants and easement filings.
- What liens are on the property that must be paid to get a clear title for the new owner? This would include existing mortgages, back taxes, assessments or mechanics liens.
Typically, when you are buying a property the title search is conducted by an attorney or paralegal. Anyone can do a title search if they are trained. However, if you are getting a mortgage, you will need to pay a real estate attorney as they will have a series of items to do to satisfy the lender’s requirements. One of these items is to obtain title insurance. Most lenders require title insurance as this type of insurance protects the buyer in case a title issue comes up after the sale. This does not happen often but it can happen if the person searching the title missed a lien or other relevant information.
Often, individuals will invest the time to learn or pay someone to teach them how to search titles. Anyone can search titles at the courthouse. Why would someone search a title themselves? Well, this has become very common for real estate investors. As stated above, investors need material information about the home in order to determine the price to pay for a property. If an investor is bidding on a foreclosure, there is often liability on the buyer to payoff other liens to get a clear title. An investor will want to know that information ahead of time. For example, they will want to know if there are any back taxes or other liens on the property other than the loan that is being defaulted on by the current homeowner. Title searches can run $500 and up and so investors may search many properties before they actually bid on a property. So, it is a worthwhile investment to learn how to search titles themselves as it saves them money in legal fees.