What is a Title Chain?

When it comes to buying and selling real estate, it’s crucial to ensure that there are no issues with the title. 

Conflicts over property rights can drag on for years, rack up extensive legal fees, and cause bitter family battles. It’s best for all parties involved if a clear chain of title is established right from the start. Homebuyers can also purchase title insurance to ward against clerical errors, family disputes, or financial loss

Let’s break down the concept of a title chain, its significance in real estate transactions, and how you can take steps to protect yourself and your investment from fraud and other malfeasance. 

The Story Behind the Chain

Also known as a chain of title or chain of ownership, it is a historical record of all the past owners of a property. It shows the sequence of ownership, from the original builder until the present time. 

The chain should reflect continuous, unbroken ownership and include all the legal documents and transactions that occurred during each transfer. It should provide a clear picture of the property’s history and help prove the current owner’s package of rights to own and sell a home, vacant land, or commercial buildings.

Each transaction is recorded in the public land records of the county where the property is located, creating a sequential paper trail that ideally goes all the way back to the early days of your community. Since property ownership is a path to wealth and and upward mobility, knowing exactly who owns what and where is fundamental to the smooth functioning society.

In the US, a newly-elected Congress passed the Land Ordinance of 1785, which laid the groundwork for current procedures for buying and selling property. In 1862, President Abraham Lincoln signed the Homestead Act, which opened up land ownership to anyone over the age of 21. 

A system of recording ownership and documenting deeds and transfers evolved, all designed to ensure that the seller has the legal right to sell the property and that the buyer will be free from legal challenges and financial burdens that could have been avoided with a thorough title search.

Encumbrances, Liens, and Clouds

In a real estate transaction, your title company will perform a title clearance, which begins with a comprehensive search of public records. This deep dive will reveal if there are any mortgages, liens, or any other encumbrances that create a cloud on title

A property lien is a legal claim against the owner for payment of debt or lawsuit judgments. Common types of liens include:

  • Mortgage lien for missed payments
  • Unpaid property or income taxes
  • Homeowners associations unpaid dues or rule violations
  • Mechanic’s/ Contractor liens
  • Child support payment delinquency

People often use their home as collateral for loans and major home improvement projects, and for most people, it’s their biggest asset. If these debts are not taken care of, that presents an encumbrance to the smooth transfer of title to the new owner. Your title insurance company and real estate team can help you negotiate with the seller and navigate the process of clearing any liens.

Unfortunately, title chain problems due to clerical errors are not an uncommon occurrence, and as these complex transactions have a lot of moving parts, there’s a lot of opportunity for mistakes. That’s why it’s vital for an experienced professional to review everything carefully during the title clearance proceedings.

They’ll also review any possible encroachments and existing easements to guarantee that these issues won’t affect the chain of title or negatively affect the sale.

Cybercrime is on the rise, and modern technology makes it easier for unsuspecting homeowners to become a victim of forgery and fraud. Scammers frequently use phishing to target real estate transactions, so always do your due diligence and never follow wire transfer instructions sent via email — always verify verbally with a trusted agent, and always consult with a real estate attorney if you have any questions. 

If you’re in the process of purchasing a new home, plot of land, or commercial property, it’s critical that there is an unbroken chain of title. Once that’s established, it’s wise to invest in title insurance to protect yourself and your home or business from unexpected financial burdens or the hassle of a court battle. 

Partnering with a top-notch real estate team and a highly respected title company will help ensure that your experience buying real estate is smooth and your assets and peace of mind won’t be affected in the future. 

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