What Happens After the Title Search Is Complete?

A title search is a key step in any real estate transaction, involving the examination of public records to verify legal ownership and identify claims or liens against a property. This process ensures the property can be legally transferred with clear ownership. It brings potential issues to light before the transaction proceeds. A clean title is generally required for most real estate transactions, especially when financing is involved.

Interpreting the Findings

Once a title search is completed, a preliminary report is generated detailing findings that can affect a property’s ownership. This report identifies various potential issues, often called “clouds on the title,” which must be addressed for a smooth transfer.

Liens are legal claims against a property for unpaid debts. Examples include tax liens for delinquent property taxes, mechanic’s liens filed by unpaid contractors, or judgment liens from court rulings. These liens indicate a creditor’s financial interest and typically need to be satisfied before ownership transfer.

An encumbrance is a broader term encompassing any claim or restriction that limits a property owner’s rights. While liens are a type of encumbrance, other examples include easements, which grant a third party the right to use a portion of the property, such as for utility lines or shared driveways. Restrictive covenants, which are rules governing how a property can be used or what structures can be built, also fall under encumbrances.

Errors in public records are common. These can range from simple clerical mistakes like misspelled names or incorrect property descriptions to more complex issues like improperly filed documents. Undisclosed or missing heirs can also pose a problem if previous owners passed away without a will or proper estate settlement, potentially leading to future claims of ownership. Instances of fraud or forgery in past property transfers can invalidate the chain of title, creating ownership disputes. Boundary disputes, often arising from erroneous surveys, can also surface, indicating disagreements over property lines.

Resolving Identified Issues

Addressing and clearing issues identified in a title search report is necessary to ensure a marketable title. The specific approach to resolution depends on the nature of the defect.

For outstanding liens, such as tax or mechanic’s liens, the most direct solution involves paying off the underlying debt. Once satisfied, the lienholder provides a release of lien document, which must be recorded with the local county clerk’s office to update public records and formally remove the claim. In some cases, negotiations with the creditor may lead to a reduced settlement amount, particularly if the lien has been outstanding for a significant period.

Clerical errors in public records, such as misspelled names or incorrect property descriptions, can be corrected by filing a corrective deed or other legal document with the county recorder’s office. This updates the official record to reflect accurate information, clearing the title. For more complex issues, like undisclosed heirs or fraudulent transfers, legal action may be necessary. A quiet title action, for instance, is a lawsuit filed to establish clear ownership of a property, asking a court to resolve any competing claims. This process typically requires legal counsel.

Securing Title Insurance

Securing title insurance is a key step in protecting property ownership. It is distinct from other forms of insurance, providing protection against financial loss from past title defects, even if not discovered during the initial search. Unlike other insurance types with recurring premiums, title insurance typically involves a one-time premium paid at closing.

There are two types of title insurance policies: owner’s title insurance and lender’s title insurance. The owner’s policy protects the buyer’s financial investment in the property for as long as they or their heirs own it. This policy covers issues including fraud, forgery, undisclosed heirs, and errors in public records that might challenge the owner’s legal right. If a covered claim arises, the owner’s policy covers legal defense costs and compensates for financial losses up to the policy’s face amount.

Lender’s title insurance, also known as a loan policy, protects the mortgage lender’s financial interest. Most lenders require this policy to ensure their loan is secured by a valid and enforceable lien. The coverage amount is usually equal to the loan amount and decreases as the mortgage is paid off. While lender’s title insurance is typically a mandatory part of closing costs for financed purchases, it provides no coverage to the homeowner. Buyers often pay for both policies at closing, with the owner’s policy being optional but recommended for comprehensive protection.

Proceeding to Closing

With the title search completed, issues resolved, and title insurance secured, the real estate transaction progresses to the final closing stage. This phase culminates in the official transfer of property ownership.

Leading up to the closing meeting, several procedural aspects are handled. A final verification of the clear title confirms all prior defects have been addressed and recorded. Various legal and financial documents are prepared, including the deed, which legally transfers ownership, and the mortgage and promissory note if financing. A closing disclosure, detailing all final loan terms, interest rates, and closing costs, must be provided to the buyer at least three business days before closing for review.

A final walk-through of the property is usually performed by the buyer within 24 to 48 hours before closing. This ensures the property is in the agreed-upon condition and any negotiated repairs are completed. The actual closing meeting, which may occur at a title company or attorney’s office, involves signing all necessary documents by both buyer and seller. During this meeting, funds for the purchase, including the down payment and closing costs, are typically exchanged via cashier’s check or wire transfer. Once all documents are signed and funds disbursed, the deed is recorded, officially transferring the property and marking the transaction’s completion.