The decision to accept a borrower’s mortgage application is crucial since it involves a lot of risks. Incorrect property titles constitute a significant risk that can even result in the buyer losing their rights to the property and the lender losing their investment. This is why many mortgage lenders rely on title searches to make sure that the loan applicant will be the sole owner of the property after the transaction.
Title search professionals are trained to spot defects in the title that can affect mortgage transactions. Knowing what to look for in this process is essential for lenders looking to minimize their risk of loss and liability when lending money on properties.
Chain of Title and Establishing Previous Owners
The chain of title or the sequence of title contains details pertaining to the history of the property, including all the property owners, right from its present owner to the original one. If the chain of title seems to be missing information, the potential claimants must establish their rights to the property in court. Failing to do so can result in them losing all claims to it in the future. This information can be accessed from the public record in the County Recorder’s office or County Clerk or from private-owned title companies.
You should be aware of the property restrictions on any property you are going to buy. There are times when a property owner has been granted permission by an entity to use or alter a piece of land, but they can’t because of these restrictions. This can even prevent a purchase or sale from going through if it does not fall in line with the restrictions.
For example, if there is a prohibition against developing on your property unless you have received approval from the local municipality, this would constitute a restriction on your title. If these restrictions are not followed, then it could be considered a fraud.
The federal government has a list of properties where there may be such restrictions, but many states do not have a mechanism for tracking them down. A reputable title search company will be able to determine if there are any property restrictions you should be aware of.
Mistakes in the Title
Errors in the legal description of a property can lead to problems later on in the transaction. So you need to ensure there’s a clear title so that no other claims can be made against it. If there are errors in the legal description of land or buildings on it (for example, if someone built an addition with their own money twenty years ago), then this could create problems when transferring ownership because the added structure was never part of the original deed given by its original owners or builders. In such cases, there may be lawsuits pending against them (for example: if they’ve been accused of building something illegal).
A tax lien would mean that one of the previous owners didn’t pay off their taxes before selling their house. In this case, the government could potentially put up the property for sale to recover overdue taxes. Remember, unpaid taxes, liens, and judgments always take precedence over a lender’s or buyer’s right to the property. If outstanding liens are discovered in the earlier stages of the transaction, then actions can be taken to solve the issue before the title is transferred.
If you’re looking for a reliable title search company to assist with mortgage title services, call Real Title Services today at 213-212-2161 or contact us via our website to get started.