What problems can a title search reveal?

Answer 1

A title search or examination will uncover any outstanding judgments, mortgages, taxes, assessments, charges, or other liens which may encumber or adversely affect the property's title. It documents the status of the titleto insure that the person or entity selling a property has the legal right to do so. It will also reveal any restrictions on the property as well as any recorded easements.

However, the title examination can reveal more serious problems that may constitute a cloud on the title. That can bring a closing to a screeching halt until the defect is resolved. Consider the following:

Many serious title defects can arise when land remains in one family for decades. Owners die and leave various heirs. They die and each leave spouses and children, and so on. The examiner must be well acquainted with probate law to follow a title through a long line of probated estates, especially when some were not probated at all. In some cases there are missing interests revealed in a comprehensive title exam.
Many lawyers don't know that they need a court order in some jurisdictions to sell real estate from an estate. They draft a deed from the estate fiduciary and later a good title examiner discovers the deed is not valid. Other errors are made by inexperienced lawyers and title 'searchers' who don't know what happens to interest in real estate held in various types of co-ownership when owners die.

Trusts can cause serious problems and often do. Many trusts are invalid and so the deeds from their trustees are also invalid. You must know trust law to determine if a trust and deed are legal and effective. If a trust fails and the trustor dies then her estate must be probated. Sometimes an owner transfers property to a trust and the trust document doesn't contain the power for the trustee to sell the real estate. You need a court order in that case.

A title examiner may find the land has no legal access or a utility company has an unused 100 foot wide right-of-way that runs right through the house (the house has to be moved). A family may have bought a ten acre parcel not knowing a gas pipeline easement ran right under it near the road, where they were planning to build the house and barn. A buyer may have signed a Purchase and Sales Agreement for thirty acres on a river to start a flower farm. The title exam may then reveal there is actually only 10 acres because the seller doesn't own the other twenty.

One owner decided to sell his house a couple of years ago. The title examination revealed that 17 years ago he thought that he purchased a double lot with a two family house on one lot and that's what he paid for. The title examiner for the new buyer determined that only the vacant lot was described in the current owner's deed, not the lot with the house on it. The lawyer who drafted that deed has died. The grantor in the deed has died and his heirs want to be paid for the house now that they have discovered the situation. The current owner thought he owned the house. He had paid off the mortgage and was going to move to Florida. He had even refinanced a few years ago. It will cost that man at least $15,000 to clear his title through a long court proceeding. He lost the sale, property prices have depreciated and the market is dead. He didn't have title insurance because it had been a cheap closing 17 years ago done by a non-practicing lawyer friend.

There are hundreds of potential problems that an inexperienced title 'searcher' won't see, especially from a distance and online. Title defects that have been missed numerous times, over a period of years, are often found only by a professional title examiner and it's happening more and more frequently. Buyers hate to pay for a title examination. The quick turn-around title companies, in their need to provide quick and inexpensive services only do a cursory search, thinking that the title has already been "searched" many times in the past so it must be okay.