Property is, typically, a big investment and new property owners want to protect the money that they invest in their property. One of the fundamental things that property owners want to protect is their ownership rights. Accordingly, it is important to have a title search conducted on the property and to purchase title insurance in case anything was missed during the title search.
A title search, if done properly, will give you a chain of title for the property, show any restrictions on the property, such as easements, and identify any outstanding liens on the property. A title search is done by searching the local land records in the town, city or county where such records are kept for the property.
Anyone can go to the office where land records are kept and perform a title search. However, many people choose to employ a title search company or an attorney to do the title search for them. It is important that a title search be thorough and reveal all encumbrances, liens, and owners of the property so that a person buying the property knows:
- that he is buying a piece of property that can be legally sold to him; and
- if there are any restrictions or encumbrances that he will become subject to or liable for when he becomes the property owner.
For these reasons, prospective property buyers should have a full title search done. Limited title searches may be done if property owners are not changing such as during a refinance of the property.
While a thorough title search will reveal potential problems and give a buyer the opportunity to rectify them, it is always possible that the person conducting the title search missed something. Since the government only provides a method for checking property ownership and encumbrances and does not verify such ownership or encumbrances, it is important to protect your investment with title insurance.
Title insurance protects property owners from incurring financial losses because of a problem with the property’s title. Title insurance companies require policy owners to have a title search done before obtaining insurance. Most banks require mortgage applicants to obtain title insurance prior to issuing a mortgage so that they can be assured that their interest in the property will be honored if a previous lien, owner or other encumbrance should come to light in the future. Title insurance policies may be issued as an owner’s policy if it is purchased by the homeowner or a lender’s policy if it held by the mortgage lender. Typically, the cost of title insurance is a one-time fee and the insurance remains in effect as long as the same owner maintains ownership of the property. A subsequent owner would need to purchase his or her own title insurance policy as they are nontransferable.
Most United States jurisdictions maintain public, yet complicated, systems of land records. Home buyers should conduct title searches, or hire someone to conduct a search, and purchase title insurance in order to make sure that their property purchase is protected.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.