| THE TITLE
Q. How do you obtain title to a property?
A. Title to real estate consists of ownership of and the right
to use the property. A title search will help the buyer find out what
rights the seller has, including the authority to sell.
Unlike personal property, title to which may pass when the property changes
hands, the
rights to the various components of real estate may be owned, leased,
or affected by claims or liens of different people. Among the many possible
existing claims against real estate are: mineral rights; unpaid mortgages;
liens of workers such as plumbers and liens of persons supplying construction
material, both of which are known as mechanic's liens; outstanding court
judgments; liens for unpaid taxes; and power-line easements, road rights-of-way
and drainage easements.
Second, there may be questions about whether the seller can convey good
title. A title
search reveals this by discovering whether there are any breaks in the
chain of title all the way
back to the original owner. Gaps in the property's chain of title might
make it impossible for the
person who appears to be the seller to transfer good title to a prospective
buyer.
An attorney, an abstract company, or a title company can conduct a title
search of the
public records of all deeds, mortgages, and other instruments that affect
the seller's title to the real estate in question. The results of this
search are usually compiled in an "abstract of title" or title
insurance commitment to help the buyer determine who has actual title
to the property, whether there are any restrictive covenants that could
limit the use of the property, and whether any individuals or institutions
have some interest or claim on it.
Government regulations, such as zoning or occupancy laws, also affect
your use of the real
estate. As a buyer, you will want to know how these restrictions might
affect your use of the
property.
There also may be subdivision covenants or common-ownership association
bylaws that
restrict the use you can make of your property. They could, for example,
restrict you from using your property to store liquor, prevent you from
renting your home, or place architectural controls on your property. Covenants
written long ago many contain restrictions that are unenforceable today,
such as prohibitions against selling your home to member of certain racial
or ethnic groups.
These can be ignored but covenants that are enforceable should be understood.
Ask for a copy of these restrictions before you make an offer to purchase.
Your attorney can help you decide if a covenant is legal and binding.
Any defects in the title should be corrected before the closing. Typically,
the seller is
responsible for remedying title defects. For these reasons, even in areas
of the country where the buyer receives a title insurance policy, buyers
and sellers may want the advice of a lawyer. Buyers and sellers should
check to see what types of title insurance policies are available, their
costs, reliability, and so forth.
Q. What is title insurance?
A. An owner's title insurance policy is an agreement that the
title insurance company will defend
against and pay losses involved in any claim covered by the policy's terms,
as long as the buyer or the buyer's heirs own an interest in the property.
The policy will cover a prior owner if, in selling the property, he or
she gave a deed containing certain warranties with respect to title.
The policy provides two types of coverage. First, if someone contests
the buyer's insured
title in a legal action, the insurer will defend the title at no expense
to the buyer. Second, if there is a defect in the title that cannot be
eliminated, title insurance provides financial indemnity to
protect the buyer from loss due to the defect, up to the amount of the
policy.
Title insurance is available from title companies and, in some states,
from lawyers' groups.
Title insurance varies in price in different parts of the country. The
extent of the protection is only as broad as the language of the policy
itself. The buyer's attorney can help gauge whether the policy is adequate.
Lenders usually require buyers to obtain title insurance that protects
only the lender. This is
known as a lender's title policy. The buyer may have to pay for additional
title insurance to protect his or her interests or negotiate with the
seller to purchase such a policy. For more on title insurance, see section
on owning a home.
An additional consideration is what legal title to hold your property
in (joint tenancy,
tenancy by the entirety, etc.) This topic is discussed fully in the chapter
on home ownership.
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