Legal-Ease: Research a property’s ownership and lien history before purchase

When a good deal comes up, whether that be when you find a bargain deal on a blouse or the perfect throw pillow for your guest room, most people love to find deals and rush to purchase the item when they find it.

In today’s real estate market when your dream property comes up for sale, you need to act quickly to ensure you get said dream property before someone else gets the property. However, acting too quickly and not doing property research on real estate is a pitfall that a lot of buyers find themselves in, especially if a buyer plans to buy real estate using cash.

Most buyers know they should hire a home inspector or an appraiser to evaluate the real property. But a property’s ownership and lien history are typically the biggest areas where buyers of real estate sometimes do not do sufficient research.

If a buyer is using a bank, the bank will usually require a property’s ownership and lien history to be evaluated prior to giving the bank’s approval to close a transaction.

A buyer should always have a title examination (sometimes called a “title search”) before closing on the purchase of real estate. A buyer can hire an attorney who can issue an opinion (sometimes called a certificate) based upon the title examination. In the attorney opinion of title, it will state if the property is free of liens and confirm the actual ownership of the property.

The biggest downside of an attorney’s opinion of title is that there is a rather short statute of limitations during which to bring claims against the attorney if the attorney made a mistake.

Further, attorney opinions of title do not provide a guarantee of a lack of fraud or against the authority of people who may have signed prior documents for the property on behalf of entities or trusts.

If a buyer purchases title insurance, instead of an attorney opinion of title, the title insurance provides maximum guarantees of “good title/ownership” at the time of purchase, which guarantees can be relied upon by the buyer as long as the buyer owns the property. Title insurance is issued by title agents and is typically more expensive than an attorney opinion of title (which is largely due to the maximum guarantees title insurance provides).

Buyers sometimes skip out on title examinations and title insurance to reduce closing costs. But later the buyer could find a typo on a deed from decades prior making the property’s ownership questionable — even if the property was in the same family for generations. In such a circumstance, the issue may not be uncovered until after the seller and the seller’s family have all died or moved away. Without title insurance, the buyer may face an insurmountable obstacle to using the property for collateral or selling the property in the future.

Thus, when buying real estate, even if paying cash, a buyer should do proper research and ensure the property’s ownership and lien history is evaluated.

Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. 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.