What is the first thing that people think of when buying a home? I can guess the top five might be deciding on the optimum location, choosing the style that best suits current needs, age (home or person), number of rooms, and of course price. Rarely when I meet buyers do they first ask me about the paperwork involved and if they need a title report. Real estate transactions require volumes of documents that have to be read, understood, signed and transferred. Rushing along without taking the necessary time can lead to a mess or worse. A dream property may end up being a nightmare.
My first real estate transaction was one page. I don’t remember reading a title report about the property, but maybe there was one. I remember going over the offer price with my Realtor. He showed me where to sign and we later met at an attorney’s office to complete the final transfer papers. I think the same attorney handled all real estate paperwork in the Missoula area. He knew the process by rote, it didn’t take long and quickly I was the new owner. A title report is a document that most purchasers receive today. If they don’t read and understand what they are receiving, the property they are buying may have some nasty surprises.
Title insurance is typically agreed upon in the buy-sell agreement. It is not a requirement but usually the buyers request the sellers to purchase this insurance. If a loan is involved, the lender will require additional title insurance to secure the loan. Most often the seller determines the title company they will use and will send the contract to them to open a file.
Many people that I talk to don’t even remember reading their title policy. This is a serious mistake. The purpose is to indicate liens or encumbrances on the property to the prospective buyer or lender. However the report will only reflect information that has been recorded or filed at the county where the property is located. This may or may not include roads, easements or a fruit tree hanging over the fence line. Who gets to pick the fruit and keep it? Better yet, who gets to clean up the mess from the tree? You won’t find that on a title report.
But you can find construction liens, IRS liens, and recorded easements for the neighbors. Like any insurance policy, no one really wants to spend the time reading it but when it’s time to find out if you are covered, then the glasses come out.
This happened on a home that a client was purchasing. When we started looking over the report, there was a page of easements that were not apparent on the ground. Beyond the power line easements and road easements, there were rights for the neighbors to pull their irrigation lines across the property. The buyer hadn’t anticipated relaxing after work in the privacy of their new yard while the neighbors banged pipes in the backyard. The seller had forgotten to share this information but it was clearly documented in the title report. Many buyers might have missed this line in the title.
When something is outlined in the report from the title company, the best approach is to call them and ask about that specific item. The wealth of knowledge at title offices is often not used to the fullest capacity. Title company employees spend every day looking at property histories, reading deeds, researching liens and scrutinizing paperwork. If you ever venture to the courthouse records offices, they are the ones who are sitting at microfilm screens or computers deciphering lengthy trails of documents. Trying to read deeds written in the late 1800s which have been photographed is tedious, tough work. If you have ever asked them questions about a specific property you already know this. If you haven’t, you will be impressed at the depth of information they will share.
Title reports aren’t just for buyers. Sellers should also get a title report prior to selling. It’s always easier to do the research first about ownerships, liens and easements prior to selling, when you are thinking about the possibility. You don’t want to delay a buyer or worse, lose a buyer because the title was a problem.
There may be some unknown issues that have to be resolved before the home will have a clear title to convey. Several times, when I was working with homeowners prior to marketing, the title company showed us that a loan the owner thought had been paid off was still showing as a lien on the property. Lenders have to release liens once fully paid and sometimes this step is overlooked. The title company helped the owner resolve the issue and the home was ready to sell.
I have also seen where the ownership is not in the correct name even though the sellers thought it had been changed. For instance, after a spouse dies, the property should be quit-claimed into the survivor’s name.
Title companies can be a valuable resource for property owners. They can help with a complicated ownership trail or with a simple explanation of documents. Use their extensive knowledge to help you understand your property. Don’t be the one with the story about a buyer walking away just because the title needed to be resolved. If you think you may sell, do a bit of research first and it may save you some surprises.
Joy Earls is a Real Estate Broker/Owner of Joy Earls Real Estate. She truly enjoys your stories, calls and emails: You can find her at: firstname.lastname@example.org or 406-531-9811.