Title Examinations

Al just found out that the offer he submitted to purchase his dream house was accepted by the seller. Al has begun working out the details of his mortgage loan with his lender. The lender advised him that a title examination is required as a part of the closing process.

What Is a Title Examination?

In nearly every transaction involving a mortgage loan, the lender requires a title examination. The purpose of a title examination is to determine the nature of the property owner's interest in the property, whether the property owner has the right to convey the property, and whether any others have claims against the property. The laws regarding the recordation of instruments affecting title to real property differ from state to state. In large measure, the nature of the title examination will be determined by the recordation system in place in a given state. Generally speaking, however, most title examinations involve a similar procedure. The title examiner (usually an attorney or an employee of a title company) reviews the chain of title in reverse chronological order and examines every transfer of the property. Furthermore, the title examiner searches for outstanding liens against the title to the property.

What if The Title Examiner Misses Something?

As part of most mortgage loan transactions, the borrower is required to purchase title insurance. The purpose of title insurance is to protect the lender in the event an error or omission occurs during the title examination. In addition, for a separate fee, a borrower may purchase title insurance to protect his or her interest. The process of removing a cloud on the title to real estate, such as an outstanding judgment lien or similar encumbrance, can be quite costly. Title insurance provides a measure of protection in this regard.

What Is the Average Cost of a Title Examination?

The cost of a title examination varies widely from state to state. In light of the fact that the title to some properties may have been transferred numerous times over periods of time in excess of 75 years or more, a title examination may involve quite a bit of work on the part of the title examiner. Generally speaking, however, the cost of a title examination is between $125 and $300. A real estate agent should be able to provide information as to the customary charge for a title examination in a given area.

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