You may have heard the term “chain of title” but not really known what it means, even if you’re buying a house. It’s just one more legal term in a long list of legal terms at closing.
But it’s important to understand what a clear chain of title is and its importance in homeownership.
But it’s important to understand what a clear chain of title is and its importance in homeownership.
The Purpose of a Chain of Title in Real Estate Transactions
A chain of title is a document that is used to record the previous transfers of ownership of the property. It’s an historical real estate record. This report is vital because it can help prevent future claims of ownership from other parties.
To establish a clear chain of title a title search is performed. This search provides needed insight into the ownership and the claims on the property.
Part of the mortgage underwriting process, a title company usually performs it.
To establish a clear chain of title a title search is performed. This search provides needed insight into the ownership and the claims on the property.
Part of the mortgage underwriting process, a title company usually performs it.
Establishing Chain of Title
A title company will research the previous owners through public records and other legal documents that are related to the property. Here are the steps for researching and establishing a clear chain of title.
- Gather all relevant legal documents
- Review the deed
- Trace previous ownership
- Check for gaps in ownership history
- Verify all information is correct
- Resolve any issues related to the property
3 Liens That Affect Chain of Title
A chain of title can be affected by an owner’s lien. There are three types of liens that affect chain of title.
Tax lien—This is an involuntary lien placed against the property due to non-payment of property taxes. The taxes must be paid before the property can be sold.
Judgment lien—Also an involuntary lien resulting from unpaid homeowner association dues and contractor bills. Again, the bill must be paid before the property can be sold.
Mortgage lien--This is a voluntary lien and a very common one. If the property has a mortgage balance at the time of closing, the balance must be paid before ownership can transfer.
Tax lien—This is an involuntary lien placed against the property due to non-payment of property taxes. The taxes must be paid before the property can be sold.
Judgment lien—Also an involuntary lien resulting from unpaid homeowner association dues and contractor bills. Again, the bill must be paid before the property can be sold.
Mortgage lien--This is a voluntary lien and a very common one. If the property has a mortgage balance at the time of closing, the balance must be paid before ownership can transfer.
Chain of Title Documents
To complete a chain of title, both a deed and a property title are needed. The deed transfers ownership to the new party.
Property title simply refers to the rights a new owner has to the property, legally and equitably. These rights represent the privileges and limitation that are conveyed upon the new buyer.
Property title simply refers to the rights a new owner has to the property, legally and equitably. These rights represent the privileges and limitation that are conveyed upon the new buyer.
Issues with Chain of Title
Here at Lilly Title & Settlement, we perform title searches every day. If we find any issues with the chain of title, we notify you. Sometimes we can get the problem solved and the closing proceeds as planned.
There are other times when the issue can’t be resolved. At that point, you can choose to address it by paying the lien or choosing to cancel the sale.
Bottom line, a clear chain of title is incredibly important when purchasing a home. It safeguards you from known legal problems. It’s also important to make a one-time purchase of homeowner’s title insurance to protect your investment from unknown legal problems.
Got questions about chain of title or title insurance? Lilly Title & Settlement is here to help! . Feel free to reach out to us: 540-414-8763.
There are other times when the issue can’t be resolved. At that point, you can choose to address it by paying the lien or choosing to cancel the sale.
Bottom line, a clear chain of title is incredibly important when purchasing a home. It safeguards you from known legal problems. It’s also important to make a one-time purchase of homeowner’s title insurance to protect your investment from unknown legal problems.
Got questions about chain of title or title insurance? Lilly Title & Settlement is here to help! . Feel free to reach out to us: 540-414-8763.
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