What is a title search? A comprehensive guide.

Whether you are buying a house for the first time or closing on your tenth sale, you’ll undoubtedly come across the term title search. A title search is an essential part of the closing process and can protect buyers from unforeseen issues with a property.

As an investor, it is in your best interest to understand as much as you can about title searches.

What is a title search?

A title search is an extensive search of the history of a property. The search will determine various essential factors for closing, including the individuals or entities holding title, liens, ownership claims, unpaid taxes, code violations, and more.

The search is a necessary part of the closing process that follows federal and state guidelines and, in turn, protects the buyer from unforeseen consequences.

Property ownership

In most cases, the ownership will be determined by looking at the last deed of title. However, there are occasions when this can become more complicated.

For example, in some states, a legally married individual cannot take out a mortgage or sell a property without their spouse’s consent. Regardless of whether the individual purchased the property before they were married, their spouse will likely need to sign the deed or another legal document to legitimize the sale.

If there is a dispute over ownership, it is often unearthed during the title search. As the buyer, the last thing you want is to walk into a legal mess upon purchasing the property. A title search can prevent this from happening.

Liens

A lien is a claim or legal right to an asset and must be cleared before closing.

If you take out a mortgage, the mortgagor will hold the first lien position, meaning that upon sale, they will be the first party paid off. Other liens can include outstanding contract work, federal tax liens, or child support liens.

All of these “cloudy title” issues must be resolved to pass a “clean title” to the buyer.

Who does the title search?

The title search is conducted by a licensed attorney or title company.

Generally, the cost of a title search will range from $75 – $200. The search timeline will depend on the company, but 1-2 weeks is a reasonable estimate.

Title insurance

In addition to conducting the title search and coordinating closing, among other things, the title company will offer title insurance. For the buyer, this is called an owner’s policy. An owner’s policy is optional additional insurance offered to the buyer to protect against title issues. You may be thinking: Isn’t that what the title search is for?

Yes, but it can be more complicated.

Several situations would not be discoverable by a title search. Since a title search can only identify issues filed in public record, i.e., liens and documented owner disputes, buyers are open to unfiled risks.

Potential issues include ownership disputes from spouses or heirs, unfiled mortgage liens, liens missed during the title search, and more. Each state regulates the cost of title insurance, and the price will be the same for all title companies across the state.