Property Title Search: What Is It, And How Does It Work?

Buying a home is an exciting milestone – and a huge investment. Like any investment, a home purchase comes with some risks but, you can mitigate those risks by working with a real estate agent, getting an appraisal, scheduling a home inspection and purchasing homeowners insurance.

Another way to reduce your risk as a home buyer is by utilizing a title search for your property. Let’s take a look at what a title search is and how it works.

What Is A Title Search?

A title search examines all available public records for a property to determine whether the seller has a clean title and can therefore legally transfer ownership rights to the buyer.

Ideally, a title search should also uncover any liens, easements, claims, encumbrances or other defects that could delay the real estate transaction or cause the home purchase to fall through completely.

Why Is A Property Title Search Necessary?

A title search is a necessary step in the home buying process for the following reasons:

• It protects you and your lender against any problems with a property’s title. Let’s say a second owner with a legal claim against your new home sues you for ownership rights after you’ve closed on your mortgage. A title search would likely have revealed this title problem before you and your lender became locked into a home loan or refinance. This is why your lender will require a title search if you’re buying a home with a mortgage.
• It protects you against other title defects. Mortgage liens, restrictive covenants and easements follow the property, not the previous owner. If your newly purchased property has a lien against it for property taxes or other debt – such as outstanding homeowners association (HOA) fees or unpaid contractor bills for home improvements or repairs – these encumbrances will become your financial responsibility as the new owner.

Because there is a potential for oversights during this process, your mortgage lender will likely require you to purchase title insurance if you’re financing your home purchase. This will protect the lender from any issues the title search may have missed.

Even if you’re buying a home with cash, a title search is highly recommended – as is an owner’s title insurance policy, which protects you from ownership claims and other title defects.

How Does A Title Search On A Property Work?

A title search is usually initiated by a lender as part of the underwriting process after a seller accepts your offer and a purchase agreement is created. However, you can order a title search whenever you need to determine whether anyone has made liens or other encumbrances against a property.

Typically, an abstractor – usually a title company or real estate attorney – conducts the title search. Although not generally advisable for reasons we’ll discuss later, you can perform your own title search. But regardless of who’s in charge of the property title search, it generally follows the steps described below.

Establishing A Chain Of Title

To confirm that the seller holds full ownership rights, the abstractor must establish a chain of title – the property’s complete history of ownership. To legally transfer the title, this ownership history must be continuous and unbroken all the way to the seller.

To establish a chain of title, the abstractor examines various legal documents, including the house deed, land records, property surveys, easements, federal and state tax liens, and any bankruptcy and divorce records.

Preparing The Abstract Of Title

Once the abstractor has conducted an examination of public records, legal documents and all other relevant information, they create an abstract of title.

An abstract of title – or property abstract – is a summary of the property’s ownership history as well as any liens, encumbrances, easements or existing leases on the property. This property abstract communicates whether the seller is the sole legal owner of the property.

Deciding Next Steps

Once the title search is completed, you’ll have a few options as a home buyer – but these options will depend on whether the property title is clean or dirty.

• Clean title: A clean title means the seller has full, legal ownership rights and the property is free of any liens or other encumbrances. With a clean title, you’re basically free to move forward with your home purchase.
• Dirty title: A dirty – or cloudy – title means the owner doesn’t have full ownership rights or the property has easements, encumbrances or judgments against it that prevent you from completing the transaction.

In the case of a dirty title, the title company will work to help clear the title so a warranty deed can be signed, the lender can approve the mortgage and you can close on your new home. You can also use issues revealed by the title search to negotiate certain terms with the seller.

Ultimately, the specific title issues will determine whether you decide – and whether your lender allows you – to purchase the property.

Title Search FAQs

Now that we’ve covered the basics of a title search, let’s dive a little deeper into this topic by looking at some frequently asked questions.

How long does a title search take?

Most title searches take 1 – 2 weeks. It depends on how many sources are providing records and other documentation about the property, the complexity of those documents and the age of the property.

Typically, a title search on an older home takes longer because more documents – which cover the lengthier history of the property – need to be reviewed.

Can I conduct my own title search?

You can definitely conduct your title search, and you may even save some money doing so. However, legal documents are complex and can be spread out across a number of locations, including the county courthouse, recorder’s office and county assessor’s office.

If you don’t know what you’re looking for, the process can take much longer than the typical 1 – 2 weeks it takes a professional to conduct the search. If you fail to identify a title issue, the oversight could cost you a lot more than the money you would’ve spent hiring a title company, real estate attorney or other professional.

How much does a title search cost?

Title searches generally cost $75 – $200. However, this fee depends on several factors, including the state where you’re buying the property.

Who pays for the title search?

If you’re financing your home purchase, the seller – or current owner – typically pays for the title search as part of their closing costs.

The Bottom Line

Title searches play a significant role in the home-buying process. A professionally conducted title search – as well as an owner’s title insurance policy – can protect you from any potentially expensive legal and financial hazards you may encounter long after you’ve closed on your home.

While a title search is one stop on your way to homeownership, a good first step is to get approved for a home loan. Start a mortgage application with Rocket Mortgage^® to find out the rates and terms you can expect with a home purchase.