You did everything the right way. You got pre-approved for a mortgage and looked very carefully at your options. You’ve found the perfect house, made a bid and it was accepted!
You’ve had the house inspected and appraised, and everything has come through without a hitch. Now, you just have to get through the title search.
What’s a Title Search?
If you’ve never bought a home before, finding out that there’s one more hurdle in the home-buying process that you have to jump through can be pretty frustrating. It’s important to remember, however, that all of these steps are there for your (and your lender’s) protection – and that includes the title search.
A title search is a careful examination of the public records on a piece of property to make sure that the title is free and clear of any defects. In other words, does the seller actually own the whole property, or is there another party out there with a claim against it?
Most of the time, title searches don’t turn up anything unexpected, but sometimes they show that there’s some confusion with the deed or an unexpected lien against the property. Those things have to be addressed and fixed before your lender is going to commit their funds to the deal.
Generally speaking, the older the house, the more complex (and necessary) the title search becomes. Older homes have typically changed hands more times than new ones, and that’s usually where confusion can start. Even if a home isn’t particularly old, title searches can be complex if the house has sat on the market for an extended period of time. However, even new construction requires a title search – just in case there’s an issue that the developer or contractor hasn’t mentioned.
Who Does a Title Search and How Long Does One Take?
Title searches can be handled by either a real estate attorney or a title company. Sometimes, you can pick the company or attorney who does the title search yourself, but lenders often have a method they prefer and will guide you in that direction.
As far as timing, a title search takes “as long as it takes,” and that’s probably the best answer anybody can give you on the subject. The person who does the title search has to research the entire history of the property, back to its root deed. That can mean looking at:
- Deeds and transfers of deeds
- Land records and surveys
- Divorce records
- Bankruptcy records
- Probate records and wills
- Liens and easements
- Tax records and HOA records
There’s no way to predict exactly how long a title search may take because it all depends on how complex the history of the property has become over time. (On the bright side, title searches are a lot faster today than they were even a few decades ago, thanks to the internet and the widespread availability of online records.)
How Much Does a Title Search and Title Insurance Cost?
Naturally, a title search costs money, so you can expect to pay a few hundred dollars for the service. You may have to pay extra to resolve any issues that need to be cleared up before the sale is completed.
If you’re financing the home, you’ll also need title insurance. This is a one-time premium that’s generally a few hundred dollars, and it is paid at closing. This is a guarantee that promises that the title is free and clear of defects, and it serves as your protection in the future. If, for example, you go to sell your property in a few years and a new title search turns up an unpaid lien that should have been found before, your title insurance will cover you against any losses.
What Kinds of Problems Do Title Searches Turn Up?
It can be absolutely agonizing to have to wait through a title search, wondering what kind of problems might be found. Here are the common issues that turn up:
- Unpaid property taxes: If you buy the house with unpaid taxes, you buy the tax bill, too. These have to be handled prior to the transfer of the deed.
- Improper or invalid descriptions: Sometimes there’s a small mistake on the deed in the property’s description, and those have to be corrected so that you get what you’re expecting for your money.
- Chain of title errors: This could be as simple as the misspelling of someone’s name or there could be a missing transfer in the past that doesn’t show how the property transferred from one party to the next. Without fixing that kind of mistake, you don’t know who the true owner really is.
- Liens: These are probably the most common issues you’ll find. A lien gives someone else – a creditor, usually – an invested interest in the property until the debt is satisfied. Liens could be from an old dispute with a contractor, an unpaid credit card bill or any other old debt.
- Missing interests: If a house was ever transferred through an estate, there could be an heir or two out there whose signatures are missing on some paperwork.
What Happens When There’s a Problem with the Title?
Most of the time, problems can be resolved fairly quickly. Usually, it’s the seller’s job to clear the issue and resolve everything before closing, but what you ultimately do may depend on the agreement with your lender and your desire for the house.
You could ask the seller to compensate you for fixing the title or agree to split the costs with the seller if you’re really determined to keep the house. Or, if the issue seems too complicated and you don’t want to keep waiting, you can have your deposit and earnest money refunded and walk away.
We know that the home-buying process is complicated and unfamiliar to most people. That’s why we always make it a priority to help buyers understand each step of the process and their options.