What happens during a title search?

Factual Questions
1

Loooong story short: We’re getting a loan remodification. All went well, and six to seven months after initial approval we received the confirmation letter — closing documents were to arrive in the mail within two weeks.

Hahahaha!

No ownership or other changes have taken place since the original closing a few years ago. The bank has now (for the past two months) been saying that there is a “problem with the title.” Because of customer service issues (impossible to get someone on the phone, no information at that level, etc.) that’s about all the information I have. I’m pretty sure it will all work out in the end, but I’d like to find out more information just to know what’s going on.

I’ve called the town clerk, and they have no problems (tax, buildings, etc.). I called the county clerk and they have no problems. Annnnnndddddd now what? I realize title searches run a few hundred bucks, but I don’t need anything official to take to a bank, I just want to see/know what’s on there and what could be causing the problem. Aside from Ghostbusters, who do I call next? New York, if it makes a difference.

Thanks,

Rhythm

2

IANAL, but as I understand it, a title search means that someone from the bank physically goes to the registry of deeds and looks through the history of the lot for defects in the title. They want to be able to trace the title back as far as the documents go, and not find any problems - no unfiled documents, no missing signatures on deeds, no open liens, all previous mortgages discharged, etc. There’s nothing personally you can do about it. If there was no problem when you bought the house, but there is now, it could just mean that the original title searcher was more diligent, as in they found a needed document that the current searcher can’t find, or less diligent, as in the current searcher found something bad, like a lien, that the original searcher missed. Given the variable state of indexing and filing you find at a registry of deeds, all you can really do is wait.

When we bought our house, we had an issue where a small sliver of land (like 300 square ft) on the lot we were buying had an incomplete title history. It was bought back in the 1960s and added to the lot. At the time, no title search was done or required because the purchase price was under $100. Now however, a title search was required, and since the land in question had been willed to someone back in the 1930s, and the probate records were no longer in existence, there was no unbroken title to that slice of land. It turned out to be a major headache with financing and closing, and there was probably more signatures and paperwork to do with that small piece of land than the entire rest of the property and house.

3

So I could waltz down to the the county clerks office (I assume they’ll tell me the right office to find the registry of deeds) and play title searcher? From what little I understand (since the first contact mumbled something about the problem, no one else has been able to repeat or say anything) it’s a problem that occurred after the sale. That’s why I mentioned that there’s been no subsequent sales nor building nor tax problems. A run-of-the-mill title problem I’d just chalk up to bureaucracy, but since this supposedly happened while we were here, I want to see what’s been recorded.

4

Sure. They are public records.

5

They may even be online, especially for new filings. The records for where I live go back to 1950 online.

6

Some possible problems that may arise since you took title and obtained a title policy are:

(1) Unpaid taxes. You’ve eliminated this by checking with the county clerk.

(2) New encumbrances. You would know of this since, in most cases, you would’ve entered into them. If you have improvements in your property, there could be mechanics’ liens.

(3) Part of your property may have been condemned. You, of course, would know that, too.

(4) New easements which you agreed to.

(5) Judgments against any of the owners.

You said that there has been no change in ownership, which includes divorce or death of a title holder.

In any event, all these matters are of record, which, in most cases, you can do yourself, and in any case, you already know, but that won’t satisfy the bank. Memorandum of judgments are sometimes recorded in the Recorder’s Office (or Registry of Titles), but that is not required for them to be effective liens. That is why title searchers must also search all the court records, and that is why a title company is necessary, or an attorney who can order an abstract of the title and examine the title from the abstract.

In addition to judgments in the various courts, a person can file a suit in equity, claiming some interest or some other matter which may affect the property. The mere filing of such a suit does not give public notice, and the party must file a lis pendens in the Recorder’s Office (or Registry of Titles) to give notice of this defect to the title.

I’ve assumed that when you purchased the property, you obtained a title policy which was satisfactory to your lender then.

7

And if there was something that the title company that did the search missed, they could be on the hook for any additional costs later on down the line.

8

A new title policy or search would continue from the date of the old policy. So, if the title company missed something, the defect would not arise until a party whose interest was missed brought suit or otherwise made a claim. If the title policy did miss something of record (if you read the policy, it does not cover matters not of record - such as forgery, unrecorded easements, etc.), and a claim is made, the primary duty of the title company is to defend the title against the claim. Failing this, it is responsible for the damages. Defending the title could be more costly.

9

Do you know the name of the title and escrow company that’s doing the search? Call them and ask for customer service. You should be able to get a copy of the title report that was created.

10

My error. Title policies do cover against forgeries.

11

You could indeed - as others have noted, this is easy to do. And there are typically several little old ladies there who are happy to help.

It continually amazes me that house buyers so rarely do something that’s so easy, cheap and potentially valuable. I’ve often found things that professionals missed.

12

If there are little old ladies involved, I’ll be baking scones first!

I guess the whole expense and mystery of a special “title company” makes it seem as if there is more to it than visiting an office or two. I do get that someone has to pay for each search and the trust and responsibility of making sure the title is clear demands a premium, but it does give an odd impression.

13

Really? This doesn’t sound right. Are you saying that if I buy a house, mortgage company A performs a title search. All is good, and the mortgage is approved. Some time in the future, I decide to refinance with mortgage company B. Are you saying mortgage company B would only do a title search back to when I first purchased the house, basically trusting that mortgage company A didn’t miss anything? That sounds pretty risky for B.

14

Mortgage company A does not perform the title search. It pays a title company to do that search. If you refinance with company B and it uses the same title company as did company A, the title company is not going to redo work it already has done. It will continue from its prior policy. If company B uses a different company, the new title company will have to search ab initio, but most locations have only one title company. Some areas do not have any title companies, but this has become rarer. It was not too long ago that attorneys would pay abstract companies to make an abstract of the property in question and then examine the abstract. In those areas, again only one abstract company would be available. The abstract company would merely update the abstract on the land. If a new attorney is involved, he or she may have to examine the property from the government patent, but that would be most unusual. Let me explain why.

After the original “patent” (which is just a deed) from the USA to a valiant soldier who fought in the Revolutionary War, the title most likely would have been subdivided at least once. (If the property was not patented by the USA, a different chain of title would arise, but that’s not relevant here.) After each subdivision of a tract of land (which originally was described by a metes and bounds description), a tract opinion of the subdivision would have been made either by a title company or an attorney. Now, no lawyer is going to go prior to the laying out of a subdivision, unless it is a new one, as he or she can assume title must have been good at that time. If a title company is examining the parcel for the first time, it most likely would have issued a tract opinion on the entire subdivision at the same time it issued a policy on one lot. The tract opinion would cover the entire subdivision, so it would not have to examine before then.

As I explained before, if you are buying property, it is not sufficient to do a tax search, search the recorded instruments, and make a visual examination of the property. The seller may have judgments rendered against him or her, and those judgments are liens on the land. They run with the land, so even if the person sells the property, the lien remains. In addition, there may be hidden defects which you would not find in the records, such as forgeries, dower rights, unrecorded mechanics liens, federal taxes, etc. A title company insures over those rights. Mechanics’ liens (liens for construction work on the property) do not have to be recorded. If a mortgage company is loaning money for the construction work, it will have to examine all the waivers of all the liens by all the contractors, sub-contractors, materialmen, etc. each month to ensure there are no liens by them. (In most cases, the lender will hire the title company to do that work.) A title company does not insure over unrecorded mechanics’ liens unless it is asked to do so by the insurer. It will charge an additional premium for that work.

15

I wonder if there isn’t some confusion with the mortgage. I’ve heard a lot of stories recently about people who bought homes in the last few years, and now, when they go to sell them, everyone discovers that they don’t know WHO has the title anymore (due to banks selling and reselling the mortgage). Did your mortgage (to your knowledge) change banks/servicing companies since your purchase? (Ours did–went from a temporary servicing company to a large bank.)

16

In some provinces in Canada (which would have a system somewhat similar to the USA) they have gone to an electronic database. When I sold my house, I had a big paper deed, about 2 feet square with seal impressed. The Lands Branch made me trade it in.

This process greatly simplifies the title search process. To prevent old errors from causing problems years down the road, the Ontario law for example said that whatever was in the database was the official status of the land, overriding any other claim. This had the marvellous effect of enforcing mortgage fraud.

Some clever fellow found a free-and-clear title and went into a bank, took out a mortgage on it, and disappeared. The bank registered the mortgage against the title in good faith (they say). The couple who owned the house went to sell it; the **** hit the fan, and when the dust settled, the Ontario court ruled that the law explicitly said the database was the official word, if the legislators had intended to exclude fraud they would have said so in the law. This was eventually turned over when another case made it to the same court, but some couple meanwhile suddenly found themselves liable for a mortgage they had never taken out.

(So when I sold and bought my new house recently, the lawyers required 2 serious pieces of government ID, such as a passport.)

In your case, I suspect the bank has lost their paperwork in the process chain; They need a title search but can’t figure out who has the hot potato in their inbasket. It is logical and not surprising that they would require a title search every time a mortgage is done; just trusting what was done before is simpler, but you run the risk that something was missed the last time. How much should they/you trust prior work?

If you assume the previous search(es) were done correctly, you run the risk of being an ex-bank-employee. I think I heard once that with the old paper search, every search had to be done from square one or it was not complete. Besides, nothing is too much extra expense when the bank can just pass along those charges.

17

The Ontario law appears to me to violate the taking of property without due process under the USA’s Constitution. You did note that the ruling in the initial case was reversed in a subsequent case.

Some state use a “Torrens” system, wherein a parcel of land is registered under that system and every transaction must be noted under that registration. Cook County, IL, has a Torrens system, but most parcels are not registered under it. Any parcel can be registered under it if an owner so desires. The county makes a search of the record and publishes for “Unknown Owners.” Once the search is completed, it certifies the title subject to all the matter noted in that register. Any interest in the property must be filed with the Registrar of Torrens, and appropriately noted in the register. Consequently, any mortgagee or buyer merely has to check the register for the title holder and all liens, encumbrances on the property. Many banks in Cook County do not rely on the Register if the property is in Torrens, but will order a title policy anyway.

18

Yeah, unlike the USA, Canada has no property rights embedded in the constitution. This was a sop by Pierre Trudeau (supposedly a socialist himself) to the socialist party of the nation, the NDP, to get their assent to the new constitution. The right to ownership and enjoyment of property was specifically rejected during the constitution rewrite-repatriation.

Sounds like the Torrens system is a good idea, trying to accomplish the same thing as the land database; put an end to future title disputes from ancient errors. However, I presume the purchasing party (or owning party) has to initiate the action/choice. Where’s the incentive? If you start this process, then your property status could be in limbo until the filing deadline is over (what, 90 days? 6 months?); a title search is probably simpler and cheaper and faster, and since no advertising is happening, less risky.

19

Another possibility from personal experience. Generic name confusion. I’m trying to buy a house in Hawaii and during the search of public records, it seems I had fathered a number of children and ran off on my child support payments. I had never been to Hawaii until house hunting. I have a very common name and was able to clear up the problem (except with the stinking TSA - see pit post from a while back) with a few document faxes. The court had listed a generic name - no middle name or initial) thereby putting a few tens of thousands of us in the default basket.

20

When we bought our house 20 something years ago, it was built on farmland and one of the owners had the exact same name as Mr. Sali. There were no problems, but I thought it was a weird coincidence.