If you’ve made an offer on a home and the seller has accepted it, one of the key next steps is a property title search. Typically, the title will simply reflect the names of the people who currently own the home. However, in some cases, a title search can uncover liens or other claims on the property that you weren’t informed of. It’s possible that the sellers didn’t even know about them or thought they’d been cleared up.
To do a thorough title search, you’ll need to get an Ownership and Encumbrance (O&E) Report. This is put together through a search of deeds, tax liens (federal and state), county land records, financial judgments, divorce records, bankruptcy court records and any documents that could show claims on the property. It could also include potential claims – from a pending lawsuit, for example.
Another issue that can be discovered in a title search is something called a “wild deed.” That is when someone else has purchased the property but didn’t record the title.
If no such claims show up, the title is considered “clean” or “marketable.” That means that no one can challenge the seller’s right to sell the property to the buyer. Further, it means that no one can hold the buyer responsible for a claim, such as a lawsuit, that the seller never paid off.
If a lien or other claim on the title is discovered, the sellers can clear it up by paying it. As a buyer, you may opt to pay it yourself in exchange for the seller lowering the price of the property. However, be aware that if you won’t be able to get a mortgage or title insurance until and unless the title is cleared up. Further, you may want to do some digging to make sure everything has been discovered.
If you have a real estate agent, they’ll take care of running the property title search for you. However, if you discover issues with the title and still want to buy the house (or if you discover them after the purchase has been finalized), it’s wise to consult an experienced real estate attorney who can provide guidance and protect your rights.