Importance of Full Title Search

Home buyers should never accept someone’s word alone that they own the property and that there are no mortgages or liens on it. 

As closing attorneys, we do much more than just prepare the deed to transfer ownership. 

We do a 50-year back-search on the title on all purchases, and also issue title insurance to protect the buyer’s home and investment. 

A title search includes looking for property taxes, liens, mortgages, lawsuits, and even water bills in some jurisdictions.

Many closing attorneys will charge extra to clear issues that show up on the title. For minor issues, such as a tax lien that was paid but not released on record, we fix this without any extra charge. 

Our title searches are completed in about a week to give us time to correct any issues that show up. This means our closings are rarely delayed because of title issues. 

Buyers and Real estate agents who are frustrated by delayed closings should put Origin Title and Escrow, Inc on their next purchase contract as the closing attorney.

Do All Closing Attorneys Do a Full 50-Year Title Search? 

Unfortunately, the answer is no. In Georgia, the 50-year span is considered the standard of sufficient time to determine that a property is free from reasonable doubt of litigation, but that amount of time is not mandated. 

Some closing attorneys take their chances with a quick limited search to move the process along faster. They may expect that they most likely won’t have to pay any claims, or that title insurance will cover anything that does show up. 

The problem is that in the event that the title is not clear, filing a subsequent title insurance claim is not quick, and will cost the new property owner time, stress and money. 

The extra two or three days it takes to get a full search completed is worth the effort to save the owner and many others months of trouble. 

Why Does a Full Title Search Go Back 50 Years?

This is the time span required by the State of Georgia title standards. I have a good idea of how they came up with this figure.  

A mortgage normally matures after 30 years. For mortgages/security deeds before 1994, if it has been more than 20 years since the mortgage matured, then it reverts back to the owner and is not enforceable anymore. In 1994, the Georgia legislature changed the 20-year  enforceable period to just seven years. So now lenders typically cannot enforce a mortgage  that is seven years past maturity.  

If we add the 30-year mortgage term plus the broadest range of 20 years to take into account earlier homes, that gives us the 50-year search standard.  

With a 50-year title search, we have to search both the computer records and handwritten record books from the 1970s and earlier. At Origin Title, we take the time to do a full 50-year investigation.

Are Title Monitoring Services Worth It?

Deeds often get filed without the benefit of a title search or a real estate attorney, such as a quit claim that shares or gifts all of the property to a trusted friend or family member.  

Thieves can take advantage of this to forge the owner’s name on a deed, gifting the property to themselves, and then filing it with the county. Then they take out a loan to drain the equity, or perhaps sell the property. 

The county clerk is not expected to verify the authenticity of these deed filings. The property owner won’t learn about it until the loan has defaulted, the money is gone, and their home is being foreclosed upon, or the sheriff is telling them to move out because there are new owners.

The easiest targets are homes belonging to the elderly because they usually have a lot of equity in their home. Another easy target is investment property that may not be closely watched, especially if it is vacant land, or no one is living there.

All the information a scammer needs is right there on the internet – the tax assessors list the names of the owners and real estate deed records are public records for anyone to search.  

Home title monitoring companies also use the internet to check for unauthorized activity regarding your title. Understand that they don’t check for identity theft, only deed action. They will send an alert if they spot any activity with the deed. 

An Unclear Title 

On about half of the closings we perform, there is a need to clear up some kind of title issue. If a title is not cleared, the lender or buyer may decide not to close on the property.

Common problems include judgments, liens and bankruptcies that are discovered as we look back over 50 years of records. We may find surprise deeds, trusts, wills, divorce decrees, forged signatures, sometimes one spouse fraudulently signing the others’ name without their knowledge, inheriting without knowing that some long-lost relative also has a claim, court judgments and tax situations. There may be a fictitious name or an adopted name on the deed instead of the legal  name that needs to be verified.

There can be errors in the legal description, especially regarding easements and rights of access that could require a property survey.

Often, though, these are issues that can be resolved with just a little bit of effort. Sometimes it is just an error in the records themselves. 

One common example is a property tax lien that has been paid but not released. Even though the lien may have been fully paid, some municipalities such as the Fulton County,  do not release a tax lien unless they are specifically requested to do so. 

Closing attorneys may charge for this additional service to clear a title, although it only takes a couple of minutes to email to request the release be filed. Origin Title does not charge extra for such simple services.

Once the search is complete and all title problems have been resolved then the closing can take place as planned and the Owner’s and Lender’s Title Insurance policies can be issued to protect their respective interests.

Investor Options for Title Insurance

The standard Georgia Association of Realtor’s contract states that property buyers, by default, receive an enhanced title insurance policy at closing. Title insurance protects the owner and/or lender from title defects. An enhanced policy provides added protections against fake deeds, supplemental tax assessments, post policy forgeries and much more. 

The enhanced policy is tailored to individual owners, not companies or LLC’s.  In many cases, real estate investors purchase property through an LLC or company instead of as themselves.  These companies would need to make a specific request to get an enhanced policy.  It is possible for an enhanced policy to be issue, but it requires an endorsement to remove the requirement that the insured must be a natural person.  

For a company, a standard title insurance policy will be offered, but other options are out there that you may not know exist. It’s important to have a title expert on your side for this very reason.

Lender vs Owner Title Insurance

Mortgage lenders require title insurance on every loan they close which protects them against problems with the title. However, this type of insurance does not protect the homeowner’s investment in the home. 

The owner’s policy is separate and typically issued when the property is purchased.  Even Clark Howard, the thriftiest person in Georgia, recommends getting owner’s title insurance!  The Georgia Association of Realtors standard contract’s, default clause is that the buyer requests an enhanced policy be issued at closing.

When an owner’s and lender’s policy are issued at the same time, there is a significant discount on the premiums. It’s the smart and safe way to go.

Enhanced Title Insurance

Few things are more important than protecting a home. For a minimal cost, homeowners have the ability to reduce their risk on one of the most significant investments they will make. 

There are two types of title insurance; owner and lender. Additionally, there are two types of owner policies and two types of lender policies. 

The two types of owner’s policies are standard and enhanced. The enhanced includes coverage for 28 additional risks including the protection against anyone else making a claim on the property or title through fraud or forgery. This protection continues even after the closing date. Enhanced owner’s title insurance protects the owner against fake deeds and fraudulent claims against the property, even if those claims happen after the policy was issued. 

The added protection that enhanced title insurance provides is well worth the small additional cost at the time of closing. 

Buying real estate that is in bankruptcy

Homes purchased that are part of a bankruptcy can present unique challenges. There are also different types of bankruptcy which can make the transaction even more complex. 

Under Chapters 7 and 11, the trustee is the appointed seller of the home.  In most other cases, the owner is the proper seller.  In either case, a court order authorizing the sale is typically required.   When a home is part of a bankruptcy, it is likely to have other liens and debts attached to it.  Did you know that eliminating a debt does not eliminate a lien?   Once there’s a lien on the property, the lien must be removed in addition to any debt being eliminated. 

When the property’s trustee accepts an offer, all of the lienholders will be notified and they will be given a chance to review the offer. You can see that there are major challenges that come along with buying real estate in bankruptcy. It’s important to know that title insurance can help to avoid a huge headache by checking the liens and insuring that, as a purchaser, you will not be stuck paying for a property that has several liens on it. 

WHAT IF THE SELLER’S MORTGAGE ISN’T PAID & CLOSED WHEN YOU BUY A HOUSE?

Imagine this:  a couple buys a house in September, 2016. Unbeknownst to them, the seller opened an equity line of credit using the house as collateral in May. The title search was performed the buyer’s chosen closing attorney on September 20, perfectly in line with the usual process.  The lender didn’t file the equity line mortgage until October 10 (five months after the loan was closed). The purchase closing took place on October 14 and the new deed was filed on October 19.

The October 10 mortgage would not have been on the record as of closing because it normally takes two weeks for filings to show up.

In March, 2019, the couple decides to refinance the purchase, and the closing attorney receives a copy of the settlement statement from the purchase. It does not show the equity line mortgage as being paid at all. This means the sellers have an open equity line secured by a house they no longer own — and the buyer’s house is collateral for a loan they didn’t take out.

This is a problem for the buyers, but the original closing attorney is not at fault.

It is fortunate that the buyers purchased title insurance. Before the refinance, the title company was contacted and provided an indemnity letter covering the open mortgage.  The title insurance company will protect the house against any claim or foreclosure from the equity line. The refinance was not delayed at all. 

Real Estate agents want work with a closing attorney who both understands title insurance and recognizes anomalies –  like the absence of a mortgage payoff on a closing statement.