What is Title?: The boring (but important) part of the home buying process

Don’t worry, in our area it is your attorney that will select the title company.  This is one piece of the puzzle you needn’t concern yourself with.  However, if you know a title company that you’d like to work with, by all means, you have the right to do so.  Just alert your attorney.  There are a few of components to title – most noteworthy would be the lien search, survey and municipal search.  The lien search is a run down of the entire history of the property’s ownership, and anyone that has laid claim to the property at some point or another.  The purpose is to make sure that you will be able to own this property free and clear, unencumbered.  Both you and the bank will also get title insurance to cover you in the event there was some unrevealed cloud on the title from years ago, and some distant relative of a previous owner with claims of ownership interest pops up.   The survey is done by someone commissioned by the title company to create a blueprint of the metes, bounds, house perimeter, appurtenances, easements, etc of your property.  It’s basically an aerial illustration of the boundaries of your ownership and everything within.  If there is an existing survey on file with the town, or if the seller is already in possession of one, you can always request a copy of that, and the title company will be able to perform a survey inspection, which is basically taking the drawing you provide and just making sure everything is the same, and updating it if necessary should anything have changed.  If there is already a survey in existence, you will save yourself about $800, as this is the cost of drafting one.  So you definitely want to get a hold of an existing survey if possible.  The municipal search is a review of the property’s building records that are on file with the local municipality, such as Certificates of Occupancy, permits, violations, etc.  IF there are any open violations or permits, or if title detects something that may be illegal, there could be a delay in closing…and sometimes its substantial.  For example, the survey shows that there is a deck in the rear of the home.  There is no CO or reference to a deck with the building department.  Or the blue prints on file with the town show a deck that is located in the front of the house.  You could have a title issue…  If the deck has to then be legalized, that means the seller has to first take out a permit (4 weeks), wait for the town engineer to come out and inspect it, then another 2 weeks to give their stamp of approval.  And if there is something the town objects to upon inspection… it could be several more weeks before you’re closing.  Well in that case, you can just walk from the house right?  WRONG.  The contract usually stipulates (at least this is boiler plate) that the seller has 60 days to resolve title issues.  Not 60 days past the closing date in the contract, mind you.  That closing date in the contract is not a real date, it’s called “on/or about.”  Think of it as the beginning of a window of time that spans 30 days.  The seller has 60 days from the last day of the closing window to resolve title issues.  Got that?  So that’s 90 days from the closing date that appears in your contract.  It’s best, but not always possible to mitigate any title issues that may arise by familiarizing yourself with the building department records in advance of contract signing.  It is part of my practice to visit the town hall immediately after my clients present an offer, or if possible when I know there is mere interest in presenting an offer.  In my experience, 1 out of 3 homes has some kind of issue with the building department – either missing, or misfiled paperwork, or undocumented (and hence, illegal) work that was done inside and outside of the house.  In such cases, the seller must be notified immediately so they can set about rectifying the issue without delay.  If you wait until title does the municipal search, you are playing Russian roulette with your closing.  I should also mention that it’s not just the title company that can blow the whistle on such violations, it could also be the appraiser, who has the unique advantage of being the only outside party to the transaction that is able to view the interior of the home.  If he notes a bathroom in the basement, and there is no certificate of occupancy or even permit on file to go along with it, there could be issues.  The municipal search is the last search that is completed, and often doesn’t come through until you are within days of closing.  That’s because many local municipalities drag their feet responding to the title companies’ requests.  Why?  Because they are local municipalities and that’s just what they do.  So imagine the closing date in your contract is approaching, you’ve given your landlord notice, and the municipal search comes back with an issue.  Now you have to wait another 30-60-90 days to resolve it.  DO yourself a favor, check the municipal records in advance of contract signing, to identify and set about resolving any building issues the home might have with the town immediately.  This is no guarantee that nothing unforeseen will not arise, but it will give a good indication and measure of assurance that problems are less likely to come up.  Having said that, violations can occur at any point in time, and in my experience, in some towns they tend to pop up coincidentally just when a home is publicly listed on the market, a title company submits their record request, and the home is about to close.  Hmmm… not sure why… (extortion *cough cough*)…  But seriously folks, homeowners who do not play by the rules to begin with cannot expect the town to play nice either.  It’s unfortunately the buyer that often pays the price in delayed closings, extended rate locks, etc.  Ok, that’s all I will say on that.