Title Searches & Title Insurance
When buying real estate it's extremely important to ensure the property your buying has a clear and clean title. Buying a home is a major investment, and the last thing you want after paying thousands of dollars is to find out you don't actually own it free and clear. In order to know if there are any problems with a properties title, you can perform a title search.
- What Is A Title Search?
- Why Do I Need A Title Search?
- What Types Of Problems Will A Title Search Show?
- Encumbrances & Liens
- Why You Need Title Insurance
Encumbrances & Liens
- What Is An Encumbrance?
- What Is A Lien?
- Tax Lien
- Mechanics Lien
- Judgement Lien
- Private & Deed Restrictions
What Is A Title Search?
A title search is where a title company performs a deep search into the title's history. A title search is used to answer three questions:
- Does the seller have the right to sell?
- Are there any restrictions or allowances to the property?
- Does the property have any liens such as tax liens, mortgages, or mechanic's liens?
Why Do I Need A Title Search?
If you want to be sure the seller of a property has the right to sell, you must perform a title search. Once your sales contract is accepted, we will have a title company here in Logan search the public records to find any problems with the properties title.
If the seller is hiding any information about the property title, this search will find it. Title companies do title searches all the time, and although you can do them yourself, sometimes it best if you leave it to the professionals.
If there are any restrictions or allowances attached to the property, a title search will uncover them. As a new homeowner, it's important to understand all of the laws associated with your new purchase. You will recieve a full report on the history of your title, as well as the restrictions associated with the land it's located on.
For example, homes in the historical district on Center Street have restrictions on what type of upgrades or remodels can be performed to maintain the integrity of the area. A title search will reveal these nuances.
If the previous homeowner hasn't paid off all liens on the property, the title search should be able to uncover them. Tax liens and construction liens are the most common problems that arise in a title search.
Before purchasing the property, the title company will make sure all liens are paid off or released to ensure a clean title upon closing. If you didn't do a title search and there were unpaid liens on the property, you could be responsible to pay them off.
What Types Of Problems Will A Title Search Show?
A title search can show a multitude of problems with a property. If, after performing a title search, there are problems with a homes title; the home cannot be sold. In the Utah real estate purchase Utah Realtors use; it states that a seller is required to provide clear and marketable title to the buyer.
If there is blemish on the title, the deal could fall apart. So, how do you ensure you don't lose the home you want? Well, it depends on the situation. Here are some common problems that could arise during a title search and possible fixes, but first you need to understand what a lien is:
Encumbrances & Liens
What Is An Encumbrance?
An encumbrance is a burden on the title, and includes any claim, right, lien, estate or liability that limits an estate; encumbrances are also known as a deed restriction. Things like easements and CC&R's (covenants, conditions, and restrictions) are considered an encumbrance. Let's discuss the types of liens and encumbrances that can cause a deed to be burdened:
What Is A Lien?
A lien is anything that keeps a title from being free and clear and is recorded or filed with the county recorders office. There are many different types of liens, but they all serve the same purpose. Liens are meant to keep a title from being transferred in order to collect an amount owed or they can be filed by someone who has an interest in the property. Either way, if there is a lien on a property you're trying to buy, you have a problem.
A Tax lien is simple. If the homeowner hasn't paid their property taxes or income taxes, the government may file a lien on the property. Property liens run with the land they were filed on. This means that if the previous homeowner somehow gets out of paying them and you buy the home, you are now responsible to pay the lien. A title search will show if a property has a tax lien and can be remedied by a) paying off the lien or b) filing to have the lien removed through the courts.
A mechanics lien can be placed on a property if the owner has labor or materials supplied in improving, repairing, or maintaining real property. For example, if the seller didn't pay the contractor who finished their basement, the contractor can file a loan on the property in order to secure payment. You can't do much about this lien, it has to be paid in order to purchase a property. If the seller refuses to pay it, you can pay it or the deal will fall apart.
A judgement lien is imposed by the courts following a lawsuit. If the homeowner has a judgement lien on the property, this usually means they have unpaid bills where the lien holder filed a lawsuit in court and the defendant was issued a judgement. For example, if the seller has unpaid credit card debt and the credit card company filed a judgement against the seller, the courts can file a lien on the property. In order to remedy a judgement lien, the seller has to pay the amount owed in full and ask the filer to remove the lien.
An easement is a right for someone to use a property that is not theirs. There are two types of easements; Easement Appurtenant and Easement in Gross. Easements appurtenant involves a physical condition or use of the property and are transferred with the title. You can not remove an easement appurtenant as they are part of the land. An example of an easement appurtenant would be a driveway or an ingress to reach a land locked property.
An Easement in Gross is an easement given to a person or created by a specific need, such as a utility easement or written permission for an individual to hunt or fish on private property. Easement's in Gross are not always permanent and may not transfer with title. The title search will reveal if an easement is associated with the title.
An encroachment is where someone else's property encroaches on another's. An encroachment that has been authorized will reflect in the title when doing a title search. If the previous owner or another owner authorized an encroachment, you can not remove it unless you receive authorization form the encroacher.
Anything like trees, shrubs, or parts of fences are very common encroachments. If, however, the encroachment is unauthorized you can have the encroacher remove the encroachment or ask they pay for authorization which will then be recorded on your title.
Private & Deed Restrictions
Private and Deed Restrictions are permanent restrictions outlined in the deed as CC&R's (covenants, conditions, and restrictions). These are used to maintain the value or uniformity of a specific project or subdivision. Enforcement of these restrictions is done by the developer and home owners associations, and can be altered as they see fit.
Usually the homeowners can challenge or change these restrictions with a majority vote of the subdivision. During a title search, you or your agent can request a copy of the CC&R's for review. If you have a problem with the restrictions placed on the deed, there isn't much you can do other than back out of the deal or appeal to the HOA.
Why You Need Title Insurance
If you've gotten this far, you can now understand why title insurance is so important. There can be numerous problems with a title, and title insurance is there to protect you from losing your home and investment. Although many people don't understand the full features of a title insurance policy, it's just as important as any other type of home insurance.
You see, when you buy a home, you don't really buy the land or building, you're buying the title to the property or the right to occupy and use the space as you see fit. Your title may have limitations or claims by others, which will limit your use and enjoyments of your property and could cost you a large financial loss if not insured. Title insurance protects you and your lender against the many types of title hazards explained above.
For a one time fee, you can be protected by these hazards and be secure in your property ownership. Almost every real estate deal I have done in my 10 years as a real estate agent has included title insurance. There's a reason why almost everyone buys a title policy, you don't want to be left with an encumbrance that could cost you your home.
Why do you need title insurance? Piece of mind and full security in your right to possess real property without the encumbrance of others. Get title insurance, it's worth it. If you have any questions about buying or selling real property in Northern, Utah - please contact us with questions!
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