Page 8 - Title Insurance Explained With Closing Tips For Buyers and Sellers

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TITLE ISSUES

The job of searching the public records to identify existing Every title is made up of many different “rights” and “interests”
rights and interests is not an easy task. that may be owned by different people. The “owners” of the
property own the most valuable of the property’s rights and
The title searcher or abstracter reviews the public records to interests, but other people also may have rights to the property,
find all aspects of title, which can be seen and recognized. such as utility easements or mortgages, etc. Each title can be
From the title search, the title examiner produces a title compared to sticks in a bundle. The rights and interests are
commitment/preliminary report from which the Company will represented by the sticks. The “owners” own what we call a
issue title insurance.
“fee simple” title, which generally means they have purchased
In many areas, the title to a property can be traced back to a the most vital and valuable sticks, such as rights of possession,
royal grant, charter or the United States government. In many use, occupancy, enjoyment and inheritance. Also, within the
areas, titles are not traced back that far; instead, local custom bundle, there may be sticks that are owned by other parties.
or title insurance company requirements dictate a shorter These are called encumbrances and may consist of easements,
search. There are few titles, if any, that have a perfect history mortgages and liens.
from their source, or root, to the present day. Each transfer of When a person purchases a parcel of real estate, it is not only
ownership is a “link” in what is referred to as the “chain of title.” the physical property itself that is being acquired. The buyer
As each transaction or link takes place, there is a potential for a also is acquiring the seller’s rights and interests, known as “the
problem. Even if the entire chain of title appears to be in order, seller’s title,” in the property. It is essential for the prospective
the chain is still subject to interpretation. When searching a purchaser to know before the transaction takes place precisely
title, what we are trying to determine are the various rights and what rights or interests the seller can convey. The purchaser
interests that make up each link in the chain as it has passed also needs to know who else may have rights or interest in the
from one owner to another.
property and any encumbrances against the property that may
A “title” is composed of three basic elements. affect the use or enjoyment of the land. The title search must
cover all these rights and interests.
1 Rights and interests that are disclosed in the public records
•
or by physical inspection of the property. Examples include
deeds, mortgages, leases, parties in possession and utility
easements.

2 Rights and interests that are not recorded but exist. For
•
instance, limitations imposed by laws and statutes.
• 3 Rights and interests that are hidden. For example,

forgeries, unrecorded marriages and unknown heirs.