The Key Document: Title Reports

When purchasing real property, buyers often hear the term “clear title.” But what does it mean to have a clear title?

Well, buyers want to be sure that the property they’re purchasing is, in fact, what they have been told and what has been represented to them. Specifically, they need to confirm that there are no outside claims or liens attached to the property that would become their responsibility once it is transferred to them. Therefore, the title search is arguably one of the most important aspects of a real estate transaction, in addition to a complete and thorough review of the report.

What is a title report?

A title report is a comprehensive search on the property, the seller, the purchaser and any third-party interests in the property. It includes a legal description of the property, which clarifies ownership and seeks to address any potential issues that may be associated with the property and the parties involved in the transaction. Typically, the report outlines information on:

• property taxes
• previous ownership
• liens and judgments against any interested properties
• mortgage information

Conducting a title search also helps clear up any questions regarding past ownership and ensures that the buyer doesn’t inherit a past owner’s debt or make a blind purchase.

Then, if an issue arises with the property, it appears on the report as a title exception. Generally, these include easements, encroachments and liens, and must be resolved between the parties and the title company to “clear title.” Without clear title, the title company will be unable to insure the property and the purchasers, and the sellers will not be able to sell the property.

Basic Contents of a Title Report

When you receive a title report, you should see the following sections:

• The legal description of the property, including prior owners, location and boundaries.
• Tax information or liens on the property.
• Liens are legal claims on the property in the event that the property owner fails to pay their mortgage debts. These will typically be listed first on the report.
• Easements, which essentially allow another person to access the property.
• These can be anything from shared driveways, to walkways that go through private property to access a public property (such as a beach), and even telephone poles.
• Covenants, conditions and restrictions (CC&Rs), which are rules and restrictions associated with the property. These are especially common when purchasing a condo and should be noted.

When You Should Conduct a Title Search

A title report should be prepared by a licensed title company. Then, it should be reviewed by an experienced real estate attorney who knows what to look for and how to read the court documents. In terms of timing, the title search is usually initiated when the purchaser receives a fully executed contract. Then, any issues revealed on the title report will be negotiated and adjusted prior to closing, which grants the seller time to address them.

Published by Nataly Goldstein on PropertyShark