The purpose of a title company is to ensure that the title to the real estate is valid when turned over to the property’s purchaser. They will make sure that the seller has the authority to sell the property to the buyer. There are several steps that a title company must take before issuing title insurance. Here are steps to take before providing title insurance.
What are the Steps a Title Company Takes?
First: Title Search
Up first is a title search; this will help them raise any red flags that may come up in the transfer of ownership.
The title search’s primary focus is to check if any other people have ownership or rights to the property. The following issues will also be a part of the examination.
Outstanding Mortgages: In most cases, the current homeowner will have a mortgage attached to the property. The previous mortgage needs to be taken care of at closing to ensure the title transfer is successful.
Unpaid Tax Liens or Judgments: Properties can have ties to judgments that remain with the property until a resolution (IE payment) happens. For example, the current owner hires a plumber to install a new shower in a bathroom, and the plumber completes this work. The plumber has not yet received payment for this job; he can take the complaint to court, resulting in a property judgment. Unpaid taxes can also cause a lien on the property. In this scenario, the IRS or a different taxing authority can collect earnings in the event of a sale.
Restrictions: This would be an issue if the community has rules on whom can live there, and the buyer does not meet those criteria. The best example of this would be a retirement community that requires people to be 55 years or older to reside there full time.
Leases: Checking to ensure that the property does not have a lease in place with any tenants that the new owner needs to honor.
Misc Existing Liens: There could be an existing lien on a property for things like credit lines for home equity or loans taken out to pay off home projects. These types of liens will need to be paid for or removed before you can move forward with closing.
Unpaid HOA Dues: In some communities, HOAs have the authority to place a lien on a home or even foreclose on a property due to outstanding HOA dues.
Easements: Ensure that no special permissions are in place with the current owner that the new owner will have to honor.
Second: Property Survey
If essential, the title company will need to order a survey or drawing of the property. The primary goal of this is to ensure that there are no potential encroachments on the property that could delay the closing.
Third: Abstract of Title and Title Opinion
Abstract of Title is a historical summary of all documents associated with a property, including titles, claims against the property, and transfers.
The title company will then write a title opinion. It states that the company believes that the seller has all of the rights to sell the property and are comfortable insuring this title.
Contact Us Today
Now you understand the steps to take before providing title insurance. With so many factors that go into the title transfer process, it is essential to choose a reputable title agency to put you at ease in the home buying process. We can help you out at Venture Title Agency, give us a call today!