When referring to real estate, the title determines who has legal ownership of the property. Before purchasing property, buyers often enlist the assistance of a title company to ensure the property title is legitimate. A comprehensive review of the title can identify potential problems, allowing the seller and purchaser to address the problems before the sale is final.
A title search before closing
A title search is the process of retrieving documents relating to the history of real property to determine if any other parties have relevant interests in the property. The title search process reviews property records to make sure the person or company claiming to own the property in fact owns it, and that no other person or company could make a partial or full claim against it. While not all real estate transactions require it, a title search before closing can reveal possible snags and title defects before parties get to the property closing.
Possible title defects
During the search process, possible title defects may come to light. These are issues that could impact ownership and they should be addressed before the sale is final. In fact, the defect may prevent the sale from taking place. Common title defects include:
- Documents executed under false, expired or revoked power of attorney
- Improperly recorded legal documents
- Defective acknowledgement due to improper or expired notarization
- False impersonation of land owners
- Undisclosed heirs
- Forgeries in a deed, will, mortgage or the release of a mortgage
- Encumbrances or other liens against the property
- Unknown easements
- Boundary or survey disputes
- Discovery of a will after probate
- Gaps in the property title chain
Is title insurance necessary?
While a thorough title search may reveal a number of issues, it is still possible for problems to come to light long after the property was purchased. Title insurance is often used as a way to prevent owners and lenders against possible claims or legal fees that may arise after the sale. Title insurance has a onetime premium fee and the protection remains in effect for as long as you, or your heirs, own the property.
There are two primary types of property title insurance. Lender's title insurance is used to protect the lender's interest in the property and is often required by the mortgage lender. An owner's title insurance policy protects the property owner. In Florida, the buyer or seller can purchase either or both forms of title insurance.
The sale of real property is the largest transaction most individuals will make in their lifetime and buyers want to feel confident in their purchase. Taking steps to ensure the title of the property is legitimate is a worthwhile investment of time and funds.