When someone borrows money for a house, the person’s lender will almost always indicate that the lender will “order the title work” before the house purchase is finalized.
“Title work” is the process of reviewing the public records and analyzing other documents to confirm ownership and to find liens or mortgages. Title work generally means physically combing through the public records to find all filed documents that relate to the property. Some records are available online, but records from before the early 1990s are usually only available on paper at the county recorder’s office.
There is no required licensing for someone to be empowered to find and compile all of the recorded documents that relate to property.
Notably, however, only a licensed attorney can give an “opinion” on title. For example, only an attorney can say that a property actually does or does not have a lien or mortgage. Attorney title opinions are sometimes called title certificates.
An attorney title opinion or title certificate is just like any other legal advice, in that it has a one-year statute of limitations. Attorneys will base their opinions upon the attorneys’ analyses of publicly recorded documents. If a particular document is a forgery or fraud, the attorney is not usually able to tell by reading the document. Therefore, attorneys’ opinions of title are only reliable if the documents, upon which the opinions rely, are reliable.
Many real estate transactions in northwest Ohio are conducted relying upon an attorney’s opinion or certificate of title. However, most of the rest of the country, except Iowa, relies upon title insurance. Title insurance is literal insurance on the quality of a person’s ownership in property or insurance on the quality and validity of a lender’s mortgage on property.
Title insurance rates are calculated under a statewide formula that is based upon the purchase price of the property or the amount of the mortgage. In most instances, title insurance specifically does include insurance against fraudulent or forged documents. Therefore, title insurance is significantly more valuable than a title opinion, and title insurance costs more as a result.
Unlike title opinions and title certificates, title insurance remains in effect as long as the owner owns the property or, as the case may be, as long as the lender has the mortgage. Unfortunately, there are circumstances when a claim must be asserted against title insurance. As with any insurance, its value is only fully appreciated if/when a claim is made and defended.
Every buyer of property can decide from whom he or she wants to purchase that person’s title opinion or title insurance. Some lenders recommend certain title agencies or attorneys, often because the lender and that agency or lawfirm are owned by some of the same people. However, any homebuyer can insist that his or her title agency or qualified attorney of choice be used to conduct the title work. For house loans only, lenders are legally prohibited from requiring the homebuyer to use the lender’s affiliated title agency.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-523-5523. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.