The importance of running a title search on any property you buy is best illustrated by way of example.
Let’s say “John Doe” and his wife “Jane” are looking to retire and buy a house outside of Louisville with a little land. They come across exactly what they’ve been looking for situated on five beautiful acres in Northern Hardin County with a pond where John can spend his days fishing. The property is owned by “Joe” and his wife, who seem like a nice enough people. The Does have been looking for a house like this for months, and Joe’s property seems like the answer to their prayers.
Joe assures John and Jane that he and his wife have owned the property for 20 years “free and clear.” Without running a title search, the Does purchase the entire property with cash they have been saving up over the last decade. They sell their home in Louisville and move into their little slice of heaven.
A few months later the Does receive a piece of certified mail from the circuit court clerk. John tears open the envelope and is shocked to see that someone is foreclosing on their property! The letter says Joe and his wife did not pay their taxes, and liens had been filed against the property. The Does, devastated and without any idea about what to do, go to see a lawyer who confirms there are indeed tax liens filed against Joe and their property. The attorney also digs around and discovers that Joe and his wife, who were not the nice folks the Does took them to be, have skipped town with no intent on paying their overdue tax bills.
The Does then have to pay several thousand dollars to clear the tax liens so their property isn’t sold in foreclosure. And, to make matters worse, the attorney tells John and Jane that had they only consulted with him prior to purchase a simple title search would have certainly revealed the liens.
This story may seem far-fetched, but we here at Skeeters Bennett Wilson & Humphrey see situations like this all the time. Simply put, you should never purchase real estate without first running a title search on the property. So, what does it mean to “run the title” on a piece of real estate?
You can think of a title search like running a background check on real estate. Just like when an employer reviews a job applicant’s past employment and criminal histories to determine if the applicant is a good fit, as a potential purchaser of real estate, you can “run the title” on property to see who owns it, who owned it in the past, whether there are any liens on it, and if the property is suitable for purchase and valid transfer.
The process of running a title is relatively straightforward, but each step requires legal knowledge and technical expertise. The attorney or title searcher starts with the current owner of the property and then works backwards, examining each previous transfer of the property in painstaking detail and going back at least 30 years. Each transfer of the property is scrutinized for potential issues that may impact you as the purchaser. The attorney will make sure the correct people have signed the deeds, that the correct legal description was included on each deed transferring the property, and that all legal requirements for the proper transfer of real estate were observed.
The title searcher will also examine each person in the chain of title who owned the property while looking for any liens that may be recorded against them and that would attach to the property. Liens that are often filed against property include mortgages, mechanic’s liens, liens for unpaid taxes, and judgment liens. It is critically important to determine if any liens affect or “incumber” the property at issue because a lienholder has the right to have the property sold at a judicial sale through a process called foreclosure. This is true even if the person against whom the lien was filed against no longer owns the property. John and Jane learned this lesson the hard way.
In addition to searching for chain of title, tax, and lien issues, a skilled attorney will also search for any easements or other potential restrictions affecting the property and make sure the taxes have been paid. Finally, the attorney’s title notes are converted into a “title opinion” letter that sets out the findings for you in terms that are easy for anyone to understand, especially someone who is not an attorney.
As John and Jane’s unfortunate story makes clear, buying real estate without having the title searched is serious gamble that could have real and costly consequences. The attorneys at Skeeters Bennett Wilson & Humphrey have been skillfully searching titles all over central Kentucky since the 1970s. If you need assistance searching a title or purchasing property, reach out and put our experience to work for you.