It is important to conduct a title search prior to finalizing a real estate transaction. A title search will help determine if there are any encumbrances on the property by looking through public records to see if there any other claims to the property.

What kinds of problems will a title search find?

Two of the more common claims that can cause issues, also known as encumbrances, include:

  • Lien. A third party may place a lien on the property to signify a claim. This can happen if the previous owner had work done on the property and failed to pay off the contractor or may be the result of a dispute with the homeowners’ association. Whatever the reason for the lien, it generally transfers with the property. As a result, a new owner could find themselves subject to the lien. This could be a large and unforeseen future expense.
  • Easement. This involves a right to use the land. An easement can provide an allowance for the owner to use a driveway that has a portion on a neighboring lot or for utilities. Some easements are beneficial, while others could cause a problem.

A title search should provide information on the presence of any encumbrance on the property, such as the lien or easement noted above.

What should a prospective buyer do if the title has encumbrances?

Whether dealing with an easement or a lien, it is a good idea to have an attorney experienced in real estate law and title issues review the property and discuss any potential issues. The decision on how to handle any issues will be different for each prospective buyer, for each property. This discussion can provide the facts the prospective buyer needs to make an informed decision.