Buying real estate is a major commitment that involves more than just the transfer of physical property. When you commit to purchase a home, you may also have to take on certain responsibilities and interests of the seller. In some circumstances, the title to a home may contain defects that could result in problems down the road. To protect its investment, your bank may require verification that there are no issues with the title or deed. This responsibility often falls to the title insurance underwriter who is in charge of investigating the history of the property.
What Is A Title Underwriter?
Title insurance underwriters are generally employed by title insurance companies. This type of business is critical during the mortgage process as most banks will not approve a loan without first validating property ownership and checking for existing liens. The responsibility falls on the title underwriter to ensure that there are no defects in the property’s public records that could result in a future claim. If any type of legal issues should arise, title insurance underwriters agree to help defend the title policy holder in court.
A title underwriter may perform a wide variety of duties, such as the following:
- Research public documents like deeds, birth and marriage certificates, and wills.
- Perform a title search to validate that the deed to the property is legitimate.
- Check that the property seller actually has the right to sell the real estate.
- Determine if there are any existing liens for the property.
- Act as an escrow agent by holding deposits until the transaction has completed.
- Order a property survey.
- Issue title insurance for the home buyer which can help protect against claims.
- Act as a closing agent during the final stages of the home buying process.
What Types Of Title Problems Can Occur?
Title problems must be cleared up before real estate can be successfully transferred between parties. Depending on the type of title defect you are dealing with, short or significant delays can occur. Something as small as a public record error can cause a major snag in the mortgage process. The property title may not have been filed correctly or may have been filed incompletely. Moreover, clerical errors could potentially affect the deed or property survey, as well as put financial strain on the buyer. If these types of issues occur, the title will need to be fixed before the transaction can be completed.
One of the most common problems found during the title underwriting process are unknown liens. If the people who owned the property failed to pay their bills, a bank or other financing company may have placed a lien on the property for these unpaid debts. Although these debts are not your own, they could cause problems for you even after you have closed the sale on your house. And it is not just banks that you have to worry about; contractors, tax departments, and even utility companies can place a lien on a home due to non-payment.
The title underwriter will also look for any easements that may be on the property. An easement represents another person’s legal right to use the home buyer’s land for a specific purpose. While having an easement on a property does not always cause a problem, it can in some instances when neighbors must share a driveway or other connecting piece of land. A title underwriter will also look for boundary issues relating to the property, known as “encroachments.” An encroachment may be present if the property you are interested in buying encroaches on another person’s land. While not common, it is important to be aware of such issues.
The title underwriting process also involves a thorough look into the property’s chain of ownership. When a person dies, the ownership of their property is usually passed onto the person’s heirs. However, for whatever reason the heirs listed in the will may be missing or not reachable at the time of death. If the heir suddenly appears later on, however, they may fight for property rights. In some scenarios, a family member may contest the will to obtain property rights. These types of situations not only occur before homes are sold, but can also develop years after you have purchased the property.
Learn More About Title Underwriting
While home buyers cannot always foresee property title problems, they can protect themselves against potential defects that may remain hidden even after a detailed public record search has been conducted. Title insurance can help protect against forged deeds, undisclosed liens, misinterpretation of wills, and similar defects. If a title dispute should arise during the sale of a home, the title insurance company may be responsible for certain legal damages based on the policy. For more information about the title underwriting process or to obtain title insurance, contact the title underwriting professionals at Mathis Title Company.