What is a Title Search and What Real Estate Investors Should Know About It

What is a title search and why is it important for real estate investors to understand it? In this article, I am going to cover what a title search is, what it entails, and why real estate investors need to know how to do it.

If you’re brand new to investment properties, then one of the first things that you’ll want to do before you make your first offer is to perform a title search. A title search can help you find any liens or judgments against the property, you can also find out what the owner owes. This will help you craft a winning offer that’s good for you and the seller.

But before I dive into Title Search, I want to explain the difference between a Title and a Deed. If you understand this concept you can skip this part.

Do you remember playing Monopoly as a child? When you bought a property you were given a Title Deed card. Well, that card should have been called a Deed because it’s the physical manifestation of your property rights. A title on the other hand is your legal right to ownership of the property and the right to sell the property.

In Monopoly speak, the deed is the card you give to the other player and the title is your right to give it to the other player.

 What is a title search?

To continue with my Monopoly example, you have to examine the actual card (Deed) to find out who owns it and what exactly is owned. The player who is trying to sell you his property may not actually own it or it may be mortgaged. This process of looking up public records to determine who owns a piece of property and whether there are any outstanding claims or liens against it is a title search.

Why is a title search important for real estate investors?

It’s important for real estate investors to learn how to do a title search because it can help them negotiate better deals and avoid serious mistakes.

For example, if an investor purchases a property at a foreclosure auction without doing a title search, they could end up responsible for unpaid first mortgage or IRS liens, or other claims against the property. Mistakes like this can be very costly.

Back in the days when short sales were a thing, doing a title search helped me decide if I should make an offer or pass on it. 

Additionally, a title search can reveal any encumbrances that may restrict what an investor can do with the property. Knowing about these things in advance can help investors make informed decisions about whether or not to purchase a particular property. On the other hand, if you know how to deal with specific liens like code enforcement, then this may be a good thing.

What does a title search include? 

  1. Property Information – Address, Legal Description, and Tax ID
  2. Tax Information  – Property Taxes and Delinquent Taxes
  3. Chain of Title Information – Who is the current owner according to the deed, what kind of deed it is, deed history – from whom was the deed transferred.
  4. Mortgages or Deed of Trusts – Names of mortgage companies, institutions, and/or private individuals along with the dates of origination, assignments, and satisfactions.
  5. Other encumbrances, liens – federal tax liens, state tax liens, homeowner association dues, mechanic’s liens, etc.
  6. All pertinent documents: deeds, mortgages etc.

Should You Do Your Own Title Search?

Yes, you should learn how to do your own title search. This doesn’t mean that you should skip a search done by a professional title examiner if possible. Without a professional title search, you will not be able to buy title insurance.

Title insurance protects your investment in case there are any problems with the title that you were not able to find in your search.

Sometimes, a professional title search is not possible, when making an offer or bidding at the foreclosure auction. Even in those situations, I also get a second opinion. When I was buying at the courthouse auction, I did my own title search but after I won the bid, I always paid for a quick title search by someone else. It’s easy to miss something. When you can buy title insurance, it doesn’t matter as much but when that’s not an option, a second opinion is definitely worth it.

A title search is important for real estate investors because it can help them avoid costly mistakes, negotiate better deals, and learn about encumbrances that may restrict what they can do with the property.