Title to Your Home – What You Need to Know – Part One
Title to Your Home, What You Need To Know – What Is a Title Exam?
A title exam is a review of the ownership, use restrictions, if any, and claims against a property. A title exam is performed when a property is sold, or refinanced, and there may be other times when a title exam is conducted as well, such as during a foreclosure or bankruptcy. In a real estate transaction the title exam, or title “search”, is performed to make sure that “good and marketable” title, sometimes called “clear title”, may be conveyed from the seller to the buyer.
Who conducts title exams?
A title exam may be conducted by anyone, however, in a real estate transaction, the title exam is usually conducted by a title company, who also provides the title insurance that is put in place for the lender and the buyer of the property at closing.
How is a title exam performed?
The title company gathers together and reviews the recorded documents and records associated with the property. These documents may include the deed to the property, mortgages, liens, easements, boundary line agreements and other recorded documents that show someone’s claim against, or rights to, the property.
What does a title exam reveal?
There are many things revealed by a title exam, some of which confirm that good and marketable title may be conveyed, and some of which may need to be resolved prior to closing the sale. Some of the things the title company will look for while conducting their exam are:
1. Whether the seller has a legitimate ownership interest in the property.
2. Whether anyone else not named on the contract of sale has an ownership interest or claim against the property.
3. Whether there are any easements allowing others the use of certain portions of the property.
4. Whether there are any restrictions on the use of the property, such as neighborhood CC&Rs (Covenants, Conditions and Restrictions)
5. Whether there are any liens on the property that must be paid prior to transferring title, such as unpaid property taxes, or mechanic’s liens placed by contractors who provided services for the property, and were not paid.
6. Whether there are mortgages or loans secured by the property that must be paid off before title can be transferred.
Once you enter into a contract for the purchase or sale of a property, conducting the title exam is one of the most important steps that must be taken to insure the sale will close. In some states title companies not only conduct title exams, but process and close the sales of real property as well. In Georgia, real estate closings are handling by closing attorneys. The closing attorney named in your purchase and sale contract will order the title exam. Your real estate agent will keep in close contact with the closing attorney while the exam is underway, and assist with working through any title issues that must be resolved before closing.
Check back soon. In “Title to Your Home, What You Need To Know – Part Two” we’ll talk about clouds on title.