Once a buyer’s offer to purchase a property is accepted, they will sign a Purchase and Sale (P&S) agreement. This will then be followed by a title search – a thorough examination into the property to obtain crucial information.
Below are two important details a title search uncovers:
The property’s legal owner
When someone has listed a property and taken the steps to sell it to you, it’s natural to believe they are the owner. But this is not always true. They may not be the rightful, legal owner.
A title search helps you confirm the seller’s right to sell. You will have access to a chain of title, which will have details of all previous owners of the property going back at least 50 years. This way, you can know if the seller is listed as the current owner.
If the property is being sold by a non-owner who claims to be legally responsible for the sale, you may need to conduct further research to confirm this. For instance, if an estate’s executor is the person selling it, confirm their official appointment by the court for the role and review additional documents that permit them to sell the property.
Any encumbrances
You don’t want to buy a property that has an encumbrance because encumbrances generally follow the property, not the person. If a property has a mechanic’s lien, an unpaid mortgage loan, a judgment lien, unpaid property taxes, restrictive covenants or utility easements, they will often stay with the property. You may inherit financial liens and legal obligations if you buy it.
When you uncover encumbrances, you can require the seller to clear the discovered defects or terminate the contract.
A title search verifies if a title is marketable. It’s important to understand how to conduct such a critical search to obtain adequate information.