Before you buy a home, you need to know the property’s status. Are there owners out there that still have rights to the property? Does the property have any liens on it? These factors could affect your ability to own the property and even give you a legal nightmare down the road.
Whether you buy a home with cash or you need financing, a title search is important (mandatory if you get financing). Knowing how to conduct a free title search can help you save time if a home turns out to have title issues.
Doing it All on Your Own
You can do a title search completely on your own if you have the resources and the time. Typically, it involves spending a few hours at the local courthouse to get the proper documentation. You have to find the transfer of ownership documents for each owner in the home’s history. If you notice that there’s missing information, there could be an owner out there that could claim rights to the property down the road.
Here’s how you do it:
- Visit the courthouse in the jurisdiction of the property
- Search the public records regarding the home
- Take note of each owner and make sure that the owner properly transferred the property
- Take note of any liens on the property and look for proper satisfaction of each lien on public record
Some counties do offer this information online, but it’s not always complete. You are better off going to the courthouse in person and seeing the documents for yourself.
As you peruse the documents, make sure you take careful notes regarding ownership. Do you see a transfer from John Doe to John Smith but then the next record you see involves someone other than John Smith? This could mean that the proper paperwork wasn’t filed to transfer ownership from John Smith to the next owner. This often happens during an inheritance when the new owners don’t have the proper paperwork filed.
If you notice a gap or any liens, you may want to move onto another property.
Ordering a Title Abstract
If you don’t have the time or patience to sort through numerous papers, you could order a title abstract from a local title company. This may cost you a little money (less than $100), but it will do some of the legwork for you.
The title abstract will show you the chain of ownership as well as any current deeds on the property. You can then evaluate the chain of ownership to make sure everyone legally transferred the property. If you notice that a transfer wasn’t recorded, you’ll need to get to the bottom of the issue. Sometimes it’s just a matter of forgetting to have the documents recorded (as often happens with inherited properties). In other cases, there is a true issue that will prevent you from buying the property. You can ask the seller if he/she has the paperwork to show the legal transfer and have the documents recorded, or you can move on and not take a chance on the property.
The title abstract will also let you see any liens that are on the property. Chances are that you’ll see a mortgage recorded for the current owner, which they will pay off with the proceeds of the sale. If you see any other liens, though, you’ll want to inquire about them before buying the property.
Doing your own title search definitely has its risks, but it can save you money. A professional title examination often costs hundreds of dollars. If you think you can do it on your own, just make sure you do your due diligence. Once you know the title is clear, you can purchase owner’s title insurance to protect your interest in the property. If something should come up down the road, the insurance will help you cover the court costs to get to the bottom of the issue.