Title is a legal definition that simply means ownership and interests in the property.
We determine chain of title
by running a title examination, going back 50 years at least to a clean title. A title examination is a thorough review of the property’s history, showing current and prior ownership, as well as any liens, attachments, outstanding mortgages, or other claims to the property that may impact ownership. The title examination is a roadmap of what we need to do to “clear title” to ensure the new owner has no liabilities, financial or otherwise, when they close on the property. It is not uncommon for us to find old mortgages that have not been released, assignments to new mortgage companies that have not been recorded, or occasionally find that the owner named in the Purchase and Sale Agreement isn’t the actual owner. There can be several reasons for this, which I will cover in a later post, so stay tuned! One important thing to remember is that we can only research the public records via Registry of Deeds, court records, etc. to examine title, and this is why an owner’s policy of title insurance is so important.
(more on that later).
“The goal of every real estate conveyance is to obtain a marketable title.”
The goal of every real estate conveyance is to obtain a marketable title. This means that the property comes free of any liens, encumbrances, claims against prior owners that can affect the Buyer’s ownership. There is a BIG difference between the marketable title and insurable title!
Marketable title means the chain of title is clean and free of defects. Insurable simply means that a title insurance underwriter will take on the risk and “insure over” a known defect. While it is great for your initial purchase, you may not be so lucky when you list for sale. REO and auction properties will always guarantee an insurable title, usually through their own underwriter, but insurable simply isn’t good enough.
So, how do we make sure the property we are bidding on has marketable title? I am so glad you asked.
You ask your attorney to run a quick title examination on the property! It will cost you a few hundred dollars to check out the title before you bid on the property or send over any money to the auction company, but that pales in comparison to the thousands of dollars you could pay for a property you can’t ever sell. Our office works with examiners than can get these done in under a day in most cases, and often faster.
This is going to be the biggest investment of your life-make sure it’s a good one!
New England Property Ventures has extensive property planning experience. Which helps make investing in real estate an easy choice.
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Nothing Contained in this post creates an attorney/client relationship, and should not be construed as legal advice. Each scenario is different, and you should contact counsel for advice on your potential claim.