WHY CONDUCT A TITLE EXAMINATION OF REAL ESTATE?

Prior to purchasing real estate, it is vital that an attorney conduct a title examination of the property.  It is common in a real estate purchase transaction for the buyer’s only interaction with the closing attorney to be on the day of closing when all of the documents are signed and explained to the buyer.  However, the majority of the attorney’s work is behind the scenes preparing for the closing.  While such preparation does include preparing loan documents, affidavits, and settlement statements, the attorney’s most important function is ensuring that the buyer will have clear and marketable title to the property.  Examining title is the process that will allow the closing attorney to discover if there are any title defects that would prevent the buyer from having clear and marketable title.

Confirming Ownership of Real Estate

The first thing that is typically done in a title examination is to confirm ownership of the property that the buyer is purchasing.  It might appear that such a process would simply be accomplished by examining the current deed.  If the seller appears on the deed as the grantee, that must mean that the seller owns the property, right?  Well, hopefully that is the case, but examining the current deed for defects is not enough.  The attorney must also examine the chain of title to determine if in fact the seller has legal title to the property, with the right to convey complete ownership to another party, and whether any other parties own an interest in this property.  Prior deeds in the chain of title are examined to determine if the conveyances leading up to the current deed are valid.  Such examination includes, but is not limited to, checking the legal descriptions for sufficiency, confirming that the proper parties signed the prior deeds, and looking for gaps in the chain of title.  Estate records need to examined when heirs have conveyed property, and sometimes it is necessary to examine foreclosure records at the county clerk of court.

Real Property Liens

Aside from confirming that the seller does indeed own the property and has a legal right to convey 100% complete ownership to the buyer, the closing attorney must also examine the title for encumbrances that may impede ownership.  Such examination includes, but is not limited to, checking for unpaid taxes, deeds of trust, judgments, and other liens on the property.  If liens are discovered, they will need to be canceled of record prior to closing the purchase, or paid off at closing by the seller.  If a lien is paid off at closing, the closing attorney will need to follow up after the closing and check the public record to ensure that the lien which was paid off was canceled.  If a property is purchased with liens attached to it, potentially, the property can be foreclosed on by the lien holder.  It does not matter that the lien was in the name of a prior owner to the property, as the lien runs with the land, and will remain a lien after the conveyance to the new buyer.

As you can see from the above, there are many risks associated with purchasing real estate without a proper title examination being conducted.