Education and advice from prominent real estate professionals are key to learning about the complexities in selling and buying real estate. This is particularly true when title — or ownership — of a property is transferred from buyer to seller. To better understand this process, we turned to industry leader and subject expert Glenn Asher of AskTheTitleGuy.com.
After starting out in a sales role in 2003, Asher rose to the position of executive vice president at Kensington Vanguard National Land Services, the largest privately held title company in the country. Since then, he has closed more than 30,000 transactions and expanded his operations from New York to South Florida, where he opened offices in Miami, Broward and Palm Beach counties. With credentials such as these, Asher is an excellent source to educate us about title on property.
In the U.S., a title report is evidence of title – or ownership – and is usually written by title insurance companies. It contains a property abstract or description and shows the history of ownership — or chain of title — through public record deeds, which are legal documents wherein transfers from one owner to another are recorded.
But, most important, a title report shows all possible encumbrances — or legal claims against a property by someone other than the seller — that may place a cloud on title, impede the transfer of the property from seller to buyer or make the title unmarketable. Examples of possible encumbrances include easements — which give other parties rights to use the property — as well as liens or the legal right of creditors to use the property as an asset.
As such, it is imperative to conduct a title search through public records, which provides potential buyers the assurance of clear title. This also assures buyers that the title (or ownership) can be transferred to them from the seller free and clear of any encumbrances. This is where Asher comes in and describes to us some of the most important aspects of the process.
Q: What is typically included in a title search report and how long does the process take?
A title report consists of searches on the subject property, sellers and buyer based on the specific type of transaction that is being done. All reports include tax, judgment and lien searches, as well as patriot and bankruptcy searches. They also include the current deed of record showing ownership.
Title report turnaround time is county- and state-specific. Many of the nation’s counties have online public records and can be obtained through various channels and through title examiners. In addition, the counties that are not online must be examined by third-party vendors that physically search records in the county of the subject property.
Q: What process does a broker need to follow to ensure that a property has no prior encumbrances before a buyer takes ownership?
Brokers must communicate with the title companies and their curative departments to inquire about and confirm any issues that may hinder clear and marketable title for their respective clientele.
Q: Describe the role and importance of title insurance.
There are various types of title insurance policies that insure different types of transactions. A purchase transaction has two policies. The first is a lender policy, which ensures that the new lender has a clean bill of health and will be in first lien position. This first lien ensures the lender that, if the borrowers do not make their mortgage payments and the lender has to foreclose, they do not have anyone in front of them to collect the money owed from their mortgage. There is also an owner’s policy which protects the new buyer from any legacy issues on title before they close. Title insurance is the only insurance that insures backwards. We insure title up until the closing and recording of any new deeds so that the seller history does not affect the new buyer once they close.
Q: What are some of the most common encumbrances you find?
Mortgages, liens and easements are the most prevalent encumbrances on title that must be cleared and resolved prior to insuring a transaction. Encumbrances are obstacles to the use and sale of property by the titleholder and can be considered a cloud on a title.
Q: Describe the most common challenges you see in clearing title when a property enters probate.
We are at the mercy of probate court, which determines the legacy of a property and the subsequent heirs that take possession of the property in case of death. We must obtain death certificates and ensure that there are no outstanding heirs to the property or debt owed by the deceased, and that the proper administrative channels have been followed, which [will] result in ownership. Probate-related transactions often come with issues that must be clarified and do not end up as an insurance claim by one or more members of the deceased’s family.
Q: Are there any specific differences or challenges in clearing title for luxury properties, in particular?
Luxury properties have the same search criteria and subsequent work as any other transaction. Typically, larger valued properties have more astute borrowers that have their paperwork in order in case something were to show on the title and we need to obtain clearance items to clear the title work, such as mortgage satisfactions and past title insurance policies.
Q: Has the COVID-19 crisis had any effect on the title process?
COVID-19 has affected title work in many fashions. Primarily, if a county does not offer online services to obtain information and they have closed the records room, there will be significant delays in obtaining real-time information. In addition, there are many travel restrictions, safety precautions and additional steps that we must take to ensure closing protection. At Kensington Vanguard, we have been fortunate enough to be able to limit the amount of COVID-19 issues by being proactive and trendsetting in our practices, communication and approach.