What’s a title exam?

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Title examination is crucial in real estate transactions to ensure that the property’s title is marketable and free of liens. It involves reviewing the property’s history and ownership, and is usually performed by a title company or attorney. Title insurance is recommended to protect against future defects in the title.

Title examination is one of the key elements in real estate transactions. Ensures that the title to a property is marketable or suitable for sale. Title exams look to see if there are any liens on a property. A lien is anything that could stop the sale of the property, such as unpaid tax liens or any restrictions placed on the property. The exams also review property history, including all past trusts, wills, and deeds associated with the property. This is called checking the chain of title, and it inspects whether ownership of the property can be legally attached to someone other than the current buyer and seller.

Title examination occurs while a property is under contract. When under contract, the buyer and seller undergo a round of negotiations and inspections that can last until the closing date. Anything wrong while the property is under contract gives the buyer the opportunity to back out of the sale or negotiate with the seller to rectify the situation. Examining the title is perhaps the most important part of this process. Without it, the buyer could end up buying a property that legally belongs to someone else, or perhaps have unpaid debts that could eventually lead to another person claiming legal ownership of the property.

Title examination is usually performed by a title company or a qualified attorney. Any of these sources will generally require a title examination fee. If the prospective buyer is applying for a loan on the property, the lender may cover the cost of a title examination fee because it is also in the lender’s interest to ensure that the title is marketable. However, in some cases, the cost of an examination may fall on the buyer or even the seller, depending on what is negotiated in the contract.

Most of the property tax and ownership history investigated during a title examination are public records and could be inspected by the buyer without the assistance of a third party. For legal purposes, however, a third party is almost always required and certainly recommended. Without a professional examination, the buyer or seller will not be able to purchase title insurance on the property. Title insurance is very common in the United States and has gained popularity throughout the rest of the world. Title insurance legally recognizes that a professional third party has examined the title to a property and determined that it is marketable. If the title turns out to be defective in the future, the buyer or seller who bought the insurance will normally be protected and compensated for some or all of the resulting damages.

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