What Is A Title Report And Why Do I Need One?
In downstate New York, it’s common practice for a buyer’s attorney to order what’s called a title report once the contract of sale has been finalized. And first time home buyers almost always ask (rightfully so), “What’s a title report?”
At its most basic, a title report is a PDF document that is anywhere from 20 to 40 pages long and includes some of the following information:
A legal description of the property that identifies the county in which the property is located, the tax map designation (section, block and lot numbers), the boundary lines that set the property apart from adjacent properties, roads, streams, etc.;
Whether there are any existing mortgages or other liens recorded against the property;
Town and school tax search results which show whether the taxes have been paid or remain due;
Certificates of occupancy (“c/o”) and certificates of compliance (“c/c”); and,
The existence of utility easements (which give utilities the legal right to run power and gas lines on the property).
There’s usually more than that, but those are the basics cover some of the more important aspects of title associated with residential properties.
When looking at a title report for the first time, a buyer may feel a bit lost, and that’s to be expected. There is a ton of legal language stuffed into a title report but its contents will be extremely important in helping your attorney identify any risks associated with taking ownership of the home.
For example and, perhaps most importantly, the title report identifies whether the person selling the home actually owns it. That may sound a bit crazy but most buyers take it for granted that the seller who signed the contract has the legal right to sell it. While it’s uncommon for circumstances to arise where a seller has zero ownership interest in the property, it’s not uncommon to see incidents where the person selling the home failed to disclose that other individuals have an interest in the property whose consent was needed for the sale to occur.
It’s also important that a title report identify whether there are any existing mortgages recorded against the property. Why? Because those mortgages and other liens need to be satisfied before ownership transfers to the buyer. If they aren’t paid off at the time of closing, guess who could get stuck holding the bill for the loan? Right – the person who just bought the property.
A title report also identifies certificates of occupancy and/or certificates of compliance which the local town has issued. These are important because they show whether the home and any improvements were built according to local codes. For example, let’s say the seller had a pool installed five years ago but the title report does not show a certificate of compliance, to prove it was built to code. There’s nothing stopping a buyer from going forward with the sale without the c/c (so long as the lender also approves) BUT when the time comes and the buyer wants to subsequently sell the property, the same issue is going to come up again, so better to deal with the issue now rather than later.
Finally, a title report will include tax search results. Like a mortgage, it’s important to identify the annual town and school taxes associated with a particular piece of property (compared to relying on information on real estate web sites that are usually provided by the brokers who, in turn, rely on sellers for the info) because the whomever owns the property is responsible for paying the taxes. Therefore, if a tax search is not performed, a buyer runs the risk of taking ownership of a home that can have upwards of tens of thousands of dollars of tax arrears associated with it.
So let’s go back to the question: what is a title report? To be specific, it is the written analysis of the status of title to real property, including a property description, names of titleholders and how the title is held, tax rate, encumbrances, and any real property taxes due.
It’s also important to mention that, if a buyer is obtaining a loan to buy the property, there isn’t a lender in the world who is going to fork over several hundred thousand dollars without first reviewing a title report. In legal language, that’s what attorneys refer to as the lender protecting its interest.
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