North American Title - What Is Title

Homeownership Rights

In legal terms, “Title” is the bundle of rights you have in your home or property. For instance, you have the right to make improvements or the right to sell the property. You may or may not have rights to the minerals or oil reserves underground. When you purchase a new home – in addition to hiring a Real Estate Agent and Mortgage Lender – you will hire a Title Agent to determine what bundle of rights attach to the property you are purchasing. The important and necessary work of the Title Agent builds a strong and secure foundation for the ultimate protection of a Homebuyer’s ownership rights.

At North American Title, our Title Agents are like master detectives, searching out every clue they can discover about a property. They look at all the data available from a variety of public record sources and then prepare a report that is given to the Mortgage Lender and the Title Insurance Underwriter. The Lender will not approve a loan and the Title Underwriter will not insure ownership rights until previous claims are cleared and any open issues are resolved.

Learn what the talented and knowledgeable professionals at North American Title review as part of the process.

1. Legal Description and Survey

Every property has a legal description as part of the sale contract or deed that identifies the location of the property plus the property dimensions and boundaries. A survey of the property can verify the accuracy of the legal description or reveal some discrepancy. For instance, the survey may discover that a fence, driveway or garage is actually built over the property line and onto the neighbor’s property. The Title Agent will look at the legal description and the survey to make sure the new owner is getting the precise property they believe they are buying and that there should be no issues or claims in the future.

2. Ownership History

The ownership history, often called the chain of title, shows everyone who has ever owned the property, the mortgages that were held by Lenders on the property through the years, and when each previous mortgage was paid off or “released.” This search is critical because the Title Agent must make sure no other owners will need to sign off on the sale; as, for instance, in the case of a married couple, a recent divorce or where there are multiple heirs to the property. Title Agents want to make sure the current owner has the right to sell the property and that all mortgages are cleared before the property is turned over to the new buyer.

3. Judgments, Liens and Easements

In our legal system, someone who is owed money resulting from a court judgment, unpaid construction fees or even unpaid child support can file a “lien” against a property to try to recover those funds. When the property is sold, those legal claims must be paid out of the proceeds of the sale. The Title Agent meticulously researches all such claims against the property and includes them as part of the title commitment or preliminary report. The Title Agent also reports any easements on the property. An easement gives a person or entity the right to access or use a portion of the property. For instance, a city government may have an easement on the property to access gas lines running beneath the surface. An owner would not be permitted to erect a permanent structure on the easement that would prevent the city from accessing the gas lines.

4. Tax Determination and Homeowners’ Association Fees

Another kind of claim or lien against a property could come in the form of a tax obligation. The Title Agent conducts a search to determine what, if any, property taxes are currently owed. In addition, there are sometimes special tax assessments or Homeowners’ Association Fees that must be identified and paid at closing.

5. Title Commitment or Preliminary Report

When all searches are complete, the Title Agent prepares a title commitment or preliminary report for the Homebuyer or Lender. The title commitment or preliminary report details everything that was discovered in the search, what items must be cleared up before the title insurance company will insure the title, and what the company will not insure against. Based on this information, the Lender will issue closing instructions that detail every item that must be satisfied by the Seller or from the sale proceeds before the Lender will lend against the property. Every person or entity that is party to the transaction wants to make sure a good and clear title is provided to the new Homebuyer at closing.

6. Lender’s Title Insurance and Owner’s Title Insurance

When the title insurance company has reviewed the transaction and is assured that all obligations have been met to satisfy the real estate sales contract, the Lender’s instructions and the title commitment, the company will issue a policy of title insurance. Title companies routinely issue two types of policies: An Owner’s Policy insures the Homebuyers for as long as they or their heirs own the home. A Lender’s Policy insures the priority of the Lender’s security interest as long as it holds a mortgage on the property.

7. Claims

After all of that careful searching, what claims could arise? There can be many hidden claims or defects that could arise. Unknown heirs to the property could appear to make a claim. It may be discovered that the deed was forged or that a power of attorney was falsified. There could be unrecorded easements or improperly recorded mortgages or liens. Title insurance offers protection against claims resulting from these defects, as set out in the policy.

8. Peace of Mind

Ultimately, the exhaustive title search process and the final title insurance policy provide security for the entire land record system across the United States. More importantly, it provides peace of mind for new homebuyers who place their trust in the valuable work we do every day at North American Title.

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