What Buyers Need to Know About Title*
With terms like “Torrens,” “warranty deed,” “ALTA,” “registered property abstract,” etc., title is no one’s idea of scintillating.
However, problems with a home’s title — the document that shows you are the legal owner — can be every bit as expensive as a defective roof or cracked foundation.
In a nutshell, here are the 4 things home Buyers need to know about title:
One. Exactly what does the Seller own? (Call this “the Brooklyn Bridge” test.)
Lawyers colloquially refer to the various property rights as a “bundle of sticks” (right to use, right to exclude, right to convey, etc.)
Two. How many of those “sticks” are they conveying to you? (You want all of them)
Three. Is anyone else contesting the Owner’s claim?
Like, ex-spouses, rival heirs, encroaching neighbors, etc.
Four. Are there any unpaid creditors who are entitled to get paid from the Seller’s proceeds?
This last question is especially critical for foreclosures, where unpaid liens, property taxes, city fines, etc. can be piling up, and the Bank that owns the property has zero motivation to discover — let alone disclose — their existence.
You’ll pay $500 or so to a good title company to carefully address these questions. Then, depending on your home’s value, another $1,000 – $2,000 to buy a home owner’s policy protecting you from any defects in title.
*From a former attorney not giving legal advice.