You might have found a home that you love but know that there may be multiple people involved in the process of buying. Real estate agents will give you several property options, and they generally negotiate the deal. Lenders are helping with the financing, and the appraisers are there to tell you how much a property is worth. You may also reach out to the inspectors to know if there are problems with the house.
Another service that you may want to know about is the one provided by a title company. The Title Insurance Company in the Philly Suburbs will do a title search as part of the process to underwrite an insurance policy. Overall, this is essential and may include conducting investigations in court judgments, land records, tax liens, deeds, and other sources.
Generally, these searches are conducted by businesses, but individuals can also do them. This way, they can find out if there's a current tax lien or other claims to the property in question, and they ensure that everything is evident when they own a property. Some may search for public record defects that prevent the home from being transferred from one party to another.
Knowing More about the Process
Before closing a deal on a specific purchase, a title company or attorney will look through the public records for a home's ownership. After they are finished with the search, their clients or the buyers will receive preliminary reports.
If there are problems with the title, the buyer is advised to contact the seller. Depending on the issue's nature, the client will decide whether he will go through with the purchase or look for another. During these discussions, a real estate agent and an attorney may be present to help clear out the possible problems involved. Learn more about a title in this link here.
Clean vs. Dirty Title
The search will generally confirm the identity of the property's current owner, whether there are existing claims against a house, and its overall legal ownership. Clean titles may involve one individual with the sole ownership of a property or land. On the other hand, there's the dirty title with many claims over a piece of land, and there are a lot of uncertainties involved.
Many may face other issues, including an unresolved building code, erroneous survey, violations of the law, and others that may result in a defective or dirty title designation. These homes have liens on them, or it might be a situation where the clerk at a local county could have misapplied or misspelled the sale information during the registration process.
Even a professional or a company experienced in these types of searches may often miss something important. Others may have overlooked a document that led to erroneous results. It's generally common for mistakes to happen, but you may encounter a lot of problems if you've already purchased a home and found out that it has a dirty title. Read more posts about bad title on this site: https://www.investopedia.com/terms/b/bad-title.asp.
This is when buyers often have insurance that can protect the mortgage lender and themselves from any financial loss if these kinds of issues arise after the sale. The insurance is going to protect everyone from encumbrances, liens, or defects in the actual ownership of a home. This is different from traditional insurance, which protects against any future problems. On the other hand, this type will protect you from past transactions and claims against previous occurrences. Generally, this type may cover the following hazards:
- Third-party ownership
- Fraud, forgery, and incorrect signatures on various paperwork
- Flawed record-keeping or defective processes in recordation
- Restrictive covenants like unlisted easements (these may usually involve the terms that can reduce the value of a home)
- Judgments against a house or encumbrances like liens or outstanding lawsuits.
Example of the Process
Here's an example that you may find helpful to know more about how a title search works. Assuming that you want to move to a bigger home and you've seen various options in the market. You find one that has piqued your curiosity and interest, and you make an offer.
When you're the buyer, you must know that the house you will buy is free of any liens and encumbrances. The other defects will prevent you from owning the property 100% or even completing the purchase. What you do is hire a title company to make sure that everything is clear.
The title companies will generally take a few steps to know about the title of a home. They will report whether it's defective or clean. The process may involve gathering court documents, legal paperwork, public records, transactions, previous sales, and going through the files of county offices. They may also check the courthouses for tax liens and lawsuits regarding the home, and this is a service where relevant information is presented and reported to you.
If everything is clear, you may want to go through with the sale. However, if there are any defects but you still want the property, you may have to consult a lawyer for more information on how to proceed. Some of these defects are quickly cleared up, and they may just involve correcting clerical errors. Others are complex, which may include existing liens against the property, so better consult the experts if you're unsure about how to proceed.
Finding the current owners of a home is only the first step. It's worth noting that the current owner may not even be aware that there's an existing claim against the property's title, and you need to find this information, especially if you're planning to stay inside a house for a very long time. Other people's debts may come back to haunt you, and you may find yourself paying for penalties, additional taxes, late payments, and other extras that are not your fault.
To prevent any extra bills like unpaid homeowner's association fees and utilities, you may want to go through a title search as an added protection. This is all part of the mortgage underwriting process that will be in your best interests in the long run.