Whether you’re thinking of selling your home or buying a new one, the property title search is an essential part of the real estate process.
Although it may seem obvious that you when you buy or sell a home you exchange the property title, did you know that there are also several other potential issues that can convey with a property title? From hidden liens to claims, a thorough title search could protect you from many financial problems in the future.
If you’re planning to buy or sell a home, here’s everything you need to know about the property title search.
What Is a Property Title Search?
A title search examines public records to determine a properties legal ownership — and any liens it may have. Your designated title company is typically responsible for conducting the property title search after an offer has been accepted — however, you can order a title search at any time. The title company searches various sources for financial judgments attached to the property. This includes; the property deed, property tax records, county records, financial judgments, and tax liens, among others.
Once the title search is complete, an Ownership and Encumbrance report is created. This report includes all of the documents that determine whether the property is free of pending lawsuits and liens. It also confirms that the seller is the legal owner of the property.
Why Do You Need a Property Title Search?
As a seller, it’s essential to confirm your property title has no defects. A marketable title helps to protect you from liability of lawsuits or another person challenging your ownership.
As a buyer, property title searches are necessary because they confirm that the seller you’re purchasing the home from is the legal owner. It also affirms that all liens and judgments — such as child support and tax — are disclosed prior to closing. If the sellers doesn’t take care of liens or judgments prior to closing, you become responsible for them as the buyer.
For example, if you purchase a property that has a $10,000 lien attached to it, the lien becomes your responsibility at closing.
How Much Does a Title Search Cost?
The cost of a title search is usually determined by the property’s location and sale price, and is typically paid as part of your closing costs.
If you want to save some money, it’s possible to complete a property title search yourself. To do this, you’ll need the property’s legal description, which you can find on the property tax statement. Once you have this information, you take it to the local County Recorder’s Office and locate the appropriate records. From this, you can determine the property’s chain of title and any liens that it may have.
It’s important to remember that if you’re financing your home purchase, your lender will also require title insurance. You should expect to pay anywhere from 0.5% to 1% of the total sales price for a title insurance policy. On the average home sale of $248,857, the title insurance fee will range from $1244 to $2488.
If you want to save money on closing costs, remember to shop around for an affordable title company. You can also consider asking prospective title companies if they’re willing to give you a discount on your title fees. Many companies are eager to provide customers a combined policy discount, for example, on a lenders policy and owner policy combined.
