Q: I know that before you purchase a house, you should do a title and lien search to protect yourself as the buyer. What are the key factors to look for? What are some “red flags”? What parts of each search document are vital? What are the terms I need to know, their meaning, etc.? Please explain in simple detail… Thank you.
A: You are looking for a few things.
First, you should confirm that the seller really owns the property, and that you have a valid contract. Sometimes you will discover that there is a co-owner that was not previously disclosed. That co-owner must participate in the sale.
Second, confirm that there are no liens against the property and, if there are, that they get paid off at or prior to closing. If there is an open mortgage, it must be paid in full at the time of the closing. Other liens can be handled depending on the type. A mechanics lien sometimes shows up, and the seller must either pay the contractor who filed it, or “bond” it, which makes someone other than the buyer responsible to pay.
Third, a survey is done, or updated, to ensure that the house you are buying is within the plot lines of the property it is built on, and that the fences that surround the property follow the boundary properly. Be sure to have your lawyer review the title report carefully to ensure that each of these items is reviewed and explained to you.