You've decided to purchase a home and hope to take possession as
soon as possible. The terms have been agreed upon and all
the financial arrangements have been made. But there's one
important detail remaining. Before the transaction can close,
a title search must be made.
The most accurate description of title is a bundle of rights in
real property. A title search is the process of determining
from the public record just what these rights are and who owns them.
A title search is a means of determining that the person who is
selling the property really has the right to sell it, and that the
buyer is getting all the rights to the property (title) that he
or she is paying for.
The search process can be undertaken by the title company in those
jurisdictions where the company maintains offices. In some
areas, however, searches are made only by practicing attorneys.
However the search is performed, in most real estate transactions
today a title insurance policy is purchased to assure the buyer
that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title
company must determine insurability of the title as part of the
search process. This leads to the issuance of a title policy,
which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the
title and will pay losses within the coverage of the policy if they
But what exactly, is involved in a title search? The Chicago
Title and Trust (CT&T) Family of Companies provides the following
Chain of Title
This is simply a history of the ownership of a particular piece
of property, telling who bought it and sold it, and when.
The information may be derived from public records, usually a County
Clerk's or Recorder's Office — or obtained from title plants privately
owned and maintained by title companies. There are great varieties
of such plants — index cards, punch cards, tract books, even sophisticated
computerized plants. However, they all contain essentially
the same information from which the history of the title may be
This is a search to determine the present status of general real
estate taxes against the property. The tax search will reveal
if taxes are current or whether any taxes are past due and unpaid
from previous years. In addition, the tax search will indicate
the existence of any special assessments against the land and, if
so, whether or not these assessments are current or past due.
A due and unpaid tax or special assessment is a prior lien or claim
on the property above all others. If a buyer purchases property
with unpaid and past due taxes or assessments against it, he or
she is likely to find a government body — the village, county or
state — placing the property up for sale to pay those taxes or assessments.
A tax search reveals the status of the taxes. Title insurance protects
the buyer against loss from unpaid and past due taxes and assessments.
Report on Possession
In many places where it operates, the CT&T Family sends inspectors
to look at the property to verify the lot size, check the location
of improvements, look for evidence of easements that are not shown
of record and check on who is living there.
The purpose of this is to supplement the information learned from
the title search. In the eyes of the law, any buyer of real
estate is assumed to have notice of all matters properly shown in
the public records as to that real estate as well as any information
that an actual inspection may reveal.
If the inspector detects an unrecorded easement or other evidence
of outstanding rights that could affect the owner's title and possibly
the value and intended use, the company tells the buyer of these
things before he or she closes the purchase. Those matters
must then either be disposed of or shown as exceptions in the title
insurance policy. Sometimes when an acceptable survey and
appropriate affidavits are received, an inspection will not be made.
Judgment and Name Search
One of the most important parts of the title search is to determineif
there are any unsatisfied judgments against the seller or previous
ownerswhich were in existence while they owned the title.
A judgment is a general lien against the debtor's real estate and
constitutes security for any money owed under the judgment.
The real estate can be sold to satisfy the judgment.
It is extremely important to be sure that a title is not subject
to judgments against the seller or previous owners. Title
insurance provides this protection. A judgment against a person
named Smith may affect the title of a seller named Smith, depending
on whether or not they are the same person. So all possible
variations of the name must be examined.
For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt,
Schmidz, Schmied, Schmiedt, Smid, Smythe, and so on. The name
Nichols can be spelled 73 different ways, from Nachols to Nychals.
The task is to determine which of these applies to the owner in
question. First names have to be checked, too. There
are 25 foreign forms of John, including Johann, Jehan, Hans, Shaun,
Gudi, and Efom.
Rights established by judgment decrees, unpaid federal income taxes,
and mechanic's liens all may be prior claims on the property, ahead
of the buyer's or lender's rights. If a judgment is discovered
that constitutes a defect in the title, it is pointed out, and the
seller must then eliminate it before the title of the new buyer
can be insured free and clear of that judgment.
When these searches have been completed, the title company issues
a commitment to insure, stating the conditions under which it will
insure the title. The buyer and seller and the mortgage lender
can proceed with the closing of the transaction after clearing up
any defects in the title which may have been uncovered by the search
The mortgage lender is as concerned as the buyer about the quality
of the title because the property is to be security for the new
mortgage loan. The mortgage lender requires assurance that
it has a valid first (or another acceptable priority) mortgage lien
on the property. This is not only common sense, but generally
is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new
buyer of the property. Although the land is the same, the
interest of the buyer and the interest of the lender are very different.
The provisions of a lender's title insurance policy are very different
from those of a buyer's policy, so the buyer should obtain his own
policy, often issued simultaneously with the lender's policy.