Chain of Title
This is simply a history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records; usually a County Clerk's or Recorder's Office, or obtained from title plants privately owned and maintained by title companies. There are great varieties of such plants; index cards, punch cards, tract books, even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be searched.
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current of whether any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due.
A due and unpaid tax or special assessment is a prior lien or claim on the property above all others. If a buyer purchases property with unpaid and past due taxes or assessments against it, he or she is likely to find a government body, the village, county or state, placing the property up for sale to pay those taxes or assessments. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.
Judgment and Name Search
One of the most important parts of the title search is to determine if there are any unsatisfied judgments against the seller or previous owners which were in existence while they owned the title. A judgment is a general lien against the debtor's real estate and constitutes security for any money owed under the judgment. The real estate can be sold to satisfy the judgment.
It is extremely important to be sure that a title is not subject to judgments against the seller or previous owners. Title insurance provides this protection. A judgment against a person names Smith may affect the title of a seller named Smith, depending on whether or not they are the same person. So all possible variations of the name must be examined.
When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title which may have been uncovered by the search and examination.
The mortgage lender is as concerned as the buyer about the quality of the title because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender's title insurance policy are very different from those of a buyer's policy, so the buyer should obtain his own policy, often issued simultaneously with the lender's policy.