Title Search Basics

A Title Search, also called an abstract of title, is a very important procedure in the settlement process. Normally a title search is required by the lender and/or title insurer. An abstract or title is to ensure “clear title”, merchantable and marketable title, meaning the land is free from encumbrances (prior mortgages or judgments) being one free from litigation and defects both legal and equitable.

What most people fail to realize is that a prior owner’s judgments attach to the real estate. If you buy a property and take title to said property, you are subject to any prior unpaid liens contained within the chain of title (the chain of ownership on a particular property normally during a 60+ year period).

For Example:

John buys his dream house on Maple Ave., which he paid cash due to a big inheritance he received. Due to the fact no lender was involved, john wasn’t required to have a title search completed. So therefore he chose not to have one done to save money and to keep settlement cost to a minimum. Several months after settling into his dream home, john starts receiving notices of judgment defaults. Things go downhill from that point. After receiving a foreclosure notice from his homeowner’s association via certified mail, John realizes he was penny conscious and dollar foolish. John finds out that the prior owner never paid his H.O.A. (Home Owners Association) dues and the association was proceeding to foreclose in order to get past monies, which they have a legal right to do. He also finds out that a person who owned the property 3 owners ago, nearly ten years ago, was sued and a monetary judgment of $150,000, was granted against that individual. At that point in time the judgment for $150,000 attached to the property on Maple Ave. The judgment was never paid and the property changed hands twice. Now John is responsible for the $150,000 and paying all past H.O.A dues. What seemed to be a dream come true for John, suddenly became a nightmare.

Whether you are doing title search for Maryland and Pennsylvania it’s a crucial part of any real estate or lending transaction.

Please don’t hesitate to call and ask us any questions about the title search process. We look forward being your title company of choice.