Education and advice from prominent real estate professionals are key to learning about the complexities in selling and buying real estate. This is particularly true when title — or ownership — of a property is transferred from buyer to seller. To better understand this process, we turned to industry leader and subject expert Glenn Asher.
After joining the firm in a business development role in 2003, Asher became an Executive Vice President at Kensington Vanguard National Land Services, one of the largest title insurance agencies in the nation servicing commercial and residential transactions. With a focus on the residential side of the business, Glenn closed more than 30,000 transactions and transitioned his team from New York to South Florida, where he opened offices for the company in Miami, Broward, and Palm Beach counties. With credentials such as these, Asher is an excellent source to educate us about title related matters on residential property.
In the U.S., a title report is evidence of title – or ownership – and is prepared by a title insurance agency or by a title insurer directly. It contains a legal description and chronicles the history of ownership — or chain of title — based on public record deeds, which are legal documents wherein transfers from one owner to another are recorded.
But, most important, a title report shows all possible encumbrances — or legal claims against a property by someone other than the seller — that may place a cloud on title, impede the transfer of the property from seller to buyer or make the title unmarketable. Examples of possible encumbrances include easements — which give other parties rights to use the property — as well as liens or the legal right of creditors to use the property as an asset.
As such, it is imperative to conduct a title search through public records, which provides potential buyers the assurance of clear title. This also assures buyers that the title (or ownership) can be transferred to them from the seller free and clear of any encumbrances. This is where Asher comes in and describes to us some of the most important aspects of the process.
Q: What is typically included in a title search report and how long does the process take?
A title report consists of searches on the subject property, sellers and buyer based on the specific type of transaction that is being done. All reports include tax, judgment and lien searches, as well as patriot and bankruptcy searches. They also include the current deed of record showing ownership.
Title report turnaround time varies based on the jurisdiction. Many of the nation’s counties have online public records while others require title examiners that physically search records in the county of the subject property.
Q: What process does a broker need to follow to ensure that a property has no prior encumbrances before a buyer takes ownership?
Brokers must communicate with the title insurance providers and their curative departments to work through any issues that may hinder clear and marketable title for their respective clientele.
Q: Describe the role and importance of title insurance.
There are various types of title insurance policies that insure different types of transactions. On purchase transactions, two policies are typically issued. The first is a lender policy, which ensures that the new lender will be in first lien position. This first lien position ensures the lender that in the event of foreclosure, they have priority to collect the money owed from their mortgage. There is also an owner’s policy which protects the new buyer from any legacy issues on title before they close. Unlike most types of insurance, title insurance covers past acts. Title is insured up until the closing and recording of any new deeds so that the seller’s history does not affect the new buyer once they close on the sale.
Q: What are some of the most common encumbrances you find?
Mortgages, liens and easements are the most prevalent encumbrances on title that must be cleared and resolved prior to insuring a transaction. Encumbrances are obstacles to the use and marketability of a property by the titleholder and can be considered a cloud on a title.
Q: Describe the most common challenges you see in clearing title when a property enters probate.
We are at the mercy of probate court, which determines the legacy of a property and the subsequent heirs that take possession of the property in case of the owner’s death. We must obtain death certificates and ensure that there are no outstanding heirs to the property or debt owed by the deceased, and that the proper administrative requirements have been followed, which [will] result in ownership. Probate-related transactions often come with issues that must be clarified so that the buyer can avoid a possible insurance claim on the property by one or more members of the deceased’s family.
Q: Are there any specific differences or challenges in clearing title for luxury properties, in particular?
Luxury properties have the same search criteria and subsequent work as any other transaction. Oftentimes, higher valued properties may have attorneys involved that can be helpful in the process should there be an issue with the title, and we need to obtain clearance items, such as mortgage satisfactions and past title insurance policies.
Q: Has the COVID-19 crisis had any effect on the title process?
COVID-19 has affected title work in many fashions. Primarily, if a county does not offer online services to obtain information and they have closed the records room, there will be significant delays in obtaining real-time information. In addition, there are many travel restrictions, safety precautions and additional steps that we must take to ensure closing protection. At Kensington Vanguard, we have been fortunate enough to be able to limit the amount of COVID-19 issues by being proactive and thoughtful in our practices, communication and approach.
Glenn Asher can be reached at [email protected].