How do you prove you own something? Generally, if you purchased something, you have the receipt. If it’s something larger, like a car or boat you have a bill of sale, a certificate of title or some other document that can prove that it’s yours. For some items like cars and boats, documentation is filed with government offices that would allow someone to find out who owns that car or boat.
Proving that a seller of a particular property owns that home, however, is a little more difficult. If you are purchasing the property and need financing to buy it, the lenders will not allow you to purchase that home without knowing for sure that the home belongs to the person who is selling it. How do you prove the seller owns the home you want to buy? You conduct or hire someone to conduct a title search.
During a title search, the examiner–who is a lawyer, title insurance company employee or title specialist–looks at the chain of title of a home, working backward from owner to owner until it reaches the point where the land was originally granted or sold from the government to the original owners.
If the title to the property has been recorded properly, your title search should be able to trace the lineage of a piece of land all the way back to when that area of the country was settled. (As with many of our laws, we derive our methods of recording title from the English system. In England some records of property ownership stretch back a thousand years or more).
How the title search is carried out varies from county to county and depends on what kinds of records have been kept. A key part of a title search is looking at public records including records of deaths, divorces, court judgments, liens, taxes and wills.
Public records in a wide variety of governmental offices must be examined for a title search, including those in the recorders of deeds, county courts, tax assessors and surveyors. Since many local governments have computerized this information, title searches can be done rather quickly.
Lawyers, title insurance companies or title specialists conduct title searches, to discover whether there are any problems–called “clouds” in the industry–with the title. The lender wants to know if any liens (claims made against a property by a person or tax assessor for payment of a debt) or judgments (by a court of law) or easements have been filed against the property, which might prevent you from receiving good title. An easement is a right that a utility company, neighbor or other third party may have to use your property for a specific purpose. A utility company might have the right to run utility lines along the side of your home.
Gina Giannelli is associate regional counsel and resident vice president of Chicago Title Insurance Company.
She explains: “A title insurance policy gives the buyer a guarantee that they own the property and [gives them] a snapshot of the title on that particular day. It’ll tell you who the owner is and it’ll also tell you if there are any recorded documents such as easements or restrictions against your property; as well as any liens or encumbrances such as your mortgage or perhaps the seller’s mortgage, or even judgments against the seller. So a policy will basically gather all that information up and present one instrument showing you a snapshot of title.”
Your title insurance will protect you from fraud happening on a real estate transaction. The title search, performed by the title insurance company, will keep you safe from a troublesome deal.
But it’s up to the buyer to make sure he or she reviews the title commitment to make sure it’s acceptable. The title insurance company will raise the issues, but the title insurance company will not make the determination for a buyer as to whether the title is good or not. That determination must be made by the buyer or his or her attorney.
Published: Aug 1, 2008