The importance of a clean title
Once buyers find a home they love, they enter into negotiations that will ideally end in the sale of the home. Home buyers start with a million questions, then discover a million more questions along the way. That’s why we’re putting together a series of blogs that aim to demystify some of the essential aspects of real estate. Today, we’ve invited our colleague Anthony Troiano, an attorney with over 20 years of Real Estate Law experience, to tackle this one. He's diving into the title—a vital, but sometimes bewildering, piece of the home-buying process.
For most people, purchasing a home is the largest single financial investment of their lives. Ensuring that a buyer has good title to the property they are purchasing is one of the most important aspects of a real estate transaction. A title examination of the property is conducted in order to determine who owns the property, as well as to determine if there are any outstanding obligations that could affect the owner’s interest in the property (such as a mortgage, unpaid property taxes or lien on the title to a property). Without the benefit of a title examination, a buyer cannot be certain that the property they are purchasing belongs to the seller or that all outstanding liens against the property have been satisfied.
If a buyer is obtaining a mortgage (or if a buyer is purchasing their property without a mortgage), the closing attorney for the lender will examine the public records relating to the property for a period of at least fifty years, in accordance with the title standards required by the Real Estate Bar Association of Massachusetts. The title examination will follow the “chain of title” and detail the sale of the property between previous owners, as well any recorded instruments or liens which affect the property, including but not limited to easements, outstanding mortgages, bankruptcies, divorces and federal tax liens, etc. For example, the telephone company may have an easement to access the property in order to maintain the telephone lines or the owner may “share” their driveway with a neighbor pursuant to a common driveway agreement. The closing attorney will review these matters in order to determine what matters affect the title to the property and if the buyer will receive a “clean” title to the property. The closing attorney will also certify the title both to the lender and buyer in accordance with the applicable state statute.
Certain matters which are not part of the public record can also affect the title. Title insurance offers protection for certain defects which are not apparent from a title examination, such as forgery, fraud and clerical errors, as well as latent defects; title insurance is available for the protection of both lenders and buyers and is highly recommended.
Want to learn about all of the aspects of the buying process? Read on!