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Title insurance can protect home buyers from title search failings

While a home buyer can check the land records to see what records affect or show on the title to the home, those land records won’t let the buyer know of judgments and federal income tax and state tax liens. (David Paul Morris/Bloomberg News)

Q: I enjoyed your column that deals with looking up the status of your title online. I learn from your column. I was an underwriter for one of the nation’s largest title companies for many years, so these dry matters interest me.

With reference to that recent column and with items that show up on a property’s title commitment, I would like to point out that judgment liens and IRS liens against landowners do not ordinarily appear on the chain of title or on the title commitment. The names of the owners down the chain of title must be searched. These matters attach to the land even though they will not be found in the land records.

A: Thank you for writing. We wrote that column to inform our readers about the information available about their home’s title and how to access it. Homeowners should be aware of matters that affect the title to their homes. Generally speaking, most homeowners know that their home loan will show up on the title, but they rarely know what other information is available and how it is displayed.

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But we agree that this could use a little more explanation. First, when we say that something shows up on the title of a home, we’re referring to the history of ownership of the property going as far back as records permit.

If you were researching ownership of your property and wanted to understand more about when the property was first transferred from the government to whoever settled it, you’d want to start with the first document that created some form of ownership of the land. That document, which could be several hundred years old, may be a government document that granted the right of ownership of your land and perhaps even your home to the first owner.

If you wanted to continue to research ownership from that point in time until today, you’d have to track each sale to each buyer. In real estate jargon, this is known as the “chain of title.”

The chain of title should show you all the owners of the property from the first to the present. Once you close, and the paperwork is filed with the local office that handles real estate records and filings, your name should show as the owner of the property on the latest document on file.

When you purchase a home, you want to make sure you get full ownership of the home. That means making sure any liabilities the seller carries are resolved at closing and don’t come back to haunt you. The title or closing office will help make sure that any liabilities are satisfied as part of the closing process.

When you’re looking up the chain of title, there are other things you may be able to see in addition to the ownership. These might include zoning restrictions and regulations and municipal ordinances. If you buy in a condominium or homeowner association, you’ll typically see condominium or homeowner association governing documents listed on the title. And, of course, you should expect to see real estate taxes show up on the title to your home if they are unpaid, or you’d want to look them up in the local municipality’s treasurer’s office.

You should see any mortgages that are tied to the property (first loan, a home equity line of credit, etc.) listed as a lien to your lender. And often you’ll see utility easements or other types of easements that could affect the use of your home. The records will show when mortgages were taken out and paid off. These filings don’t drop from your property’s land records but rather stay on as a historical record of what has happened with the property over the years.

If you want to review all of your property’s records, you can go to your local land records office and ask them to pull the property file. You may also be able to see some of this information online, through your local recorder of deeds website, and only to the extent they have digitized these records.

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But you’re right. There are items that could affect a home buyer that may not show up on a title, including some judgments, federal income tax liens and state tax liens. So while a homeowner can check the land records to see what records affect or show on the title to the home, those land records won’t let the buyer know of these types of judgments and tax liens.

Most buyers purchase a title insurance policy to protect themselves (and the lender) against matters that could harm the homeowner that were not disclosed on the title report from the title insurance company as of the date of the closing on the home.

And your comment points to yet another reason buyers should obtain an owner’s policy in addition to a lender’s policy. The title company takes on the financial responsibility in case the seller had tax liens that weren’t discovered and paid off at closing. If the buyer has title insurance, the policy should provide protection and coverage to that home buyer.

Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, bestmoneymoves.com.

©2022 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.

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