What is a Title Search?
A title search is the process of examining public records to confirm a property’s legal ownership and uncover any claims, liens, or encumbrances (restrictions or legal rights) attached to it. A thorough title review ensures that the buyer receives clear ownership and that the seller can legally transfer ownership without unexpected issues.
For Sellers: Ensuring a Clean Transfer
As a seller, you need to ensure that the title you transfer to the buyer is “free and clear” of certain encumbrances, such as mortgages or legal claims, except for those that are standard and cannot be removed (e.g., rights-of-way for utilities). This is required under Section 9 of the standard Contract of Purchase and Sale (CPS). If there are encumbrances that can’t be removed, like restrictive covenants or easements, they need to be disclosed early in the process.
Failure to do so can lead to an unenforceable contract, where the buyer could back out of the deal because you’re unable to meet the requirement of delivering a clear title.
For Buyers: What You Need to Know
As a buyer, understanding what’s on the title is crucial. You don’t want to inherit issues like unpaid property taxes, old mortgages, or legal claims that weren’t properly addressed by the seller. More importantly, some restrictions or rights (like easements, which grant others rights to use part of your property) cannot be removed and will remain on the title after the sale.
Before finalizing the purchase, your REALTOR® will provide you with a detailed title search, so you can review any encumbrances that will remain on the property. Two common clauses in real estate contracts help address this:
Buyer Satisfaction with Title: This clause confirms that the buyer is aware of the title’s existing encumbrances and accepts them.
Title Subject to Listed Encumbrances: This clause specifically lists the encumbrances that will remain on the property after the sale.
In both cases, it’s essential for you, as the buyer, to carefully review the title search and understand any restrictions or rights that come with the property.
The REALTOR®’s Role
When it comes to reviewing the title, it’s essential to consult professionals. While your REALTOR® (🙋🏻♂️🙋♀️) will review the title and flag any potential issues, it’s always a good idea to bring in a lawyer if you have concerns or need further clarification. Legal professionals can offer in-depth insights and ensure there are no legal complications tied to the property. Additionally, there are online services available that specialize in title reviews for added peace of mind.
In real estate transactions, it’s better to be safe than sorry. Relying on expert advice can prevent costly mistakes and protect your investment.
In Summary:
Sellers must make sure they are transferring a clean title, or properly disclose encumbrances that will remain.
Buyers should thoroughly review the title to be aware of any legal restrictions or claims that may affect the property.
A title search is essential to understanding the full picture of a property’s ownership and obligations.
Reviewing the title is not just a formality—it’s a critical step that protects both buyers and sellers in any real estate transaction. Reach out if you have any questions or need assistance in reviewing a title for your next transaction!
