A purchaser of real estate has the right to receive a clear, marketable title to the property being purchased absent an agreement to the contrary. In most jurisdictions, a buyer obtains a title examination and title insurance through a title company. If the purchase is financed through a bank, the bank will require title insurance to protect the bank against loss resulting from claims by third parties against the real estate. In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. The attorney’s fee may include the title insurance premium. In other states, a title insurance company or title agent directly provides the title insurance. A lender’s title insurance policy will not protect a purchaser. The purchaser must buy an owner’s policy in order to obtain protection, and doing so is generally less expensive if acquired at the same time and with the same insurer as the bank’s policy.
Banks and title insurance companies often require a survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and the location of any buildings or structures on the property. The total cost of a title insurance policy varies depending on several factors including, the amount insured and the searches requested.
The actual transfer of title to real property typically occurs via a deed at the closing of the transaction. There are various types of deeds:
- Quitclaim Deeds: These deeds contain no covenants by the grantor. These are typically used when two owners hold title to a property and one owner releases the other, perhaps due to sale of the property or a divorce of the parties.
- Warranty Deeds: These deeds contain covenant or warranties from the grantor, including that the grantor has the right to convey the property and that there are no encumbrances on the property. A general warranty deed warrants title against defects arising before as well as during the time the grantor has title. A special warranty deed contains the same covenants, but only warrants against defects arising during the time the grantor has title.
A deed must be in writing and should clearly identify the parties and the land involved. In order to protect a purchaser or lender from the subsequent rights of third parties over the real estate, it is essential to record the relevant documents by filing in a county recording office. Significant differences with regard to recording procedures and requirements exist from county to county. Most recording statutes provide that the deed must be acknowledged before a notary public to be recorded.
In addition to putting others on notice regarding ownership of the property, recording also tracks chain of title. When title insurance is purchased, the title insurer checks the chain of title to determine whether any defects occurred in prior conveyances and transfers. Such defects can then be put right or excluded from coverage.