The title search and examination are complicated processes that require a keen eye for detail. Lots of records are searched that aren’t just related to real estate documents. Tax records, judgment liens, pending lawsuits, and bankruptcy filings must all be found and carefully reviewed in order to understand what sort of impact they may have on the title holder’s right to use and possess the property.
Title agents and agent-attorneys who rely on the work of outsourced or in-house staff for a Title Commitment need to be aware of how cutting corners during this crucial process affects their business and relationships with their underwriters, lenders, consumers, and other real estate professionals.
Even if you’re getting preliminary Title Commitments straight from your underwriter, it’s important to know what should be avoided before you issue a final policy. In order to issue the highest caliber of title insurance that protects lenders and homeowners, be sure that those who prepare the Title Commitment follow these tips.
11 title search and examination practices to avoid:
1. Hiring inexperienced title examiners who are not covered by your Errors and Omissions Insurance. A good title examiner is an experienced title examiner. Many of the issues that they spot and write into the Title Commitment could be missed by the untrained eye. With that being said, even the most experienced examiners may have an “off day”, which is why you should review your E&O policy to ensure that any staff or contracted employees who do this work for you are covered.
2. Failing to set up specific procedures for your employees or outsourced abstractors/examiners to follow with every search. In some cases, up to 26 different sets of public records are searched and examined. Indexes, property abstracts and title plants might also be referenced depending on which state you do real estate transactions. This means that there should be specific, basic procedures based on your region so all pertinent information is pulled and examined.
3. Failing to reference the legal description when reviewing the chain of title documents or searching the public records. Remember the legal description is what always controls what real property is conveyed in the transaction, not the PIN (property index or identification number) or parcel number and not the address. Check for any discrepancies between it and the address and parcel number found on the purchase agreement and other documents.
4. Failing to pull documents from the land records. It’s not always sufficient to search title using indexes. This puts your company or law firm at the mercy of a county employee and potential clerical errors.
5. Failing to adhere to standard search periods. Make sure the search goes back far enough to meet your state’s requirements. States usually have a 20, 30, 40, or 50-year requirement for platted land up to the last warranty deed. In Illinois, residential, platted land, requires a 20 year search period. This means that if you are doing a search in 2019, the examiner would have to go back to the last warranty deed between unrelated parties occurring before 1999. For property where there is no prior policy, a full title search is usually required. If you’re conducting searches in other states, be sure to reference your underwriter’s guidelines to ensure your adhering to each region’s regulations.
6. Relying on another title examiner’s work, the title report, or one of your own past searches to issue a policy. Examine the prior policy to ensure it was backed by a comprehensive search. Title reports may not have all the most current information. Relying on a title search that your company or another previously completed may help save time, but it also means that new liens or errors in the public record may go undiscovered before closing.
7. Failing to review chain documents and ensure there are no missing instruments. Be sure to review instruments on the schedule B and lender documents carefully to find defects in the chain of title before issuing a policy. Not too long ago, one of our Release Tracking and Title Curative Specialists worked on a case involving a missing mortgage satisfaction and mortgage assignment for a 32-year-old mortgage. The client was able to avoid settling the defect through quiet title and close on time.
8. Failing to review court proceedings that grant title rights for errors. If there was a transfer of title due to a court ruling, like quiet title, foreclosure, or bankruptcy, those documents should be examined for any issues that might affect the title.
9. Failing to pull back title notes where a short search is used. Exceptions and requirements from the prior title work should be used in the current title insurance commitment and policy.
10. Using a current owner search in lieu of performing a full title search for a purchase transaction. Of course, what is considered a “full” search is subjective. These searches may be suitable for a refinance, but most underwriters will only allow a limited search like this if the current owner possesses a general warranty deed and financed their transaction with a loan. Most underwriters will also require the judgment index be searched for a ten year period, regardless of how long the current owner has been on title.
11. Not reviewing the work of your title examiners. A second pair of eyes is always good when issuing a Title Commitment. Consistent reviews should be a part of your written procedures.
Avoid headaches with the right title support partner
If you want more title tips, be sure to download our guide on How to Avoid Quiet Title. You’ll find more information that’s great to share with colleagues or if you’re a homebuyer or investor wanting to learn more about a title agent’s role in protecting your title rights.
PropLogix offers title support services like Release Tracking and Title Curative work to help busy title companies and law firms prevent and clear title defects. Get more details about our pricing options here.