A title search is the process of determining from the public record just what rights in real property a person has. It is a means of determining that the person who is selling the property really has the right to sell it, and that they buyer is getting all the rights to the property (title) that he or she is paying for.
The search process can be undertaken by the title company or attorneys in those jurisdictions where the company maintains offices. In most real estate transactions today a title insurance policy is purchased to assure the buyer that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process, which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend and will pay losses within the coverage of the policy if they occur.
CHAIN OF TITLE
This is simply a history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records at the county courthouse.
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or whether any taxes are past due and unpaid from the previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due.
JUDGMENT AND NAME SEARCH
One of the most important parts of the title search is to determine if there are any unsatisfied judgments against the seller or previous owners which were in existence while they owned the title. A judgment is a general lien against the debtor's real estate and constitutes security of any money owed under the judgment. The real estate can be sold to satisfy the judgment.
It is extremely important to be sure that a title is no subject to judgments against the seller or previous owners. Title insurance provides this protection. A judgment against a seller named Smith may affect the title of a seller named Smith, depending on whether or not they are the same person. So all possible variations of the name must be examined.
For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt, Scmidz, Scmied, Smythe, and so on. The name Nichols can be spelled 73 different ways, from Nachols to Nychals. The task is to determine which of these applies to the owner in question.
Rights established by judgment decrees, unpaid federal income taxes, and mechanics' liens all may be prior claims on the property, ahead of the buyer's or lender's rights. If a judgment is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgment.
When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title which may have been uncovered by the search and examination.
The mortgage lender is as concerned as the buyer about the quality of the title because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that is has a valid first mortgage lien on the property. This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender's title insurance policy are very different from those of a buyer's policy, so the buyer should obtain his own policy, often issued simultaneously with the lender's policy.
Used with permission of Chicago Title Insurance Company