What Is Title Clearance?

One of the many functions a title company performs is known as “title clearance.” Title clearance refers to the process by which a title or settlement agent researches the history of title to a property and ensures that its new owner will receive clear, or unencumbered, title to the property. While this process may seem like a formality — after all, who can sell something they don’t own — it is an essential part of the process of ensuring that the buyer’s interests are protected in a property purchase, and it is a prerequisite to the issuance of title insurance for both the buyer and the lender. Without the assurances provided by title clearance and title insurance, most buyers would be unable to secure a loan, and therefore unable to purchase property. 

However, if you find yourself asking “what, exactly, is title clearance?” you’re not alone. Understanding the steps that go into clearing title can help both buyers and sellers to be more informed and active participants in real estate transactions.

Title clearance begins with a title search — an inspection of the relevant public records related to the property. Unlike most transactions, pretty much every transaction that relates to a given piece of real estate is a matter of public record. These records go beyond just records of purchase and sale: mortgages, liens, and other encumbrances on a property’s title are all required by state or local statute to be recorded, and are searchable. 

This practice of maintaining public property records is likely rooted in history, and is intended to protect the interests of the buyer. Buying and selling property is not like buying and selling most assets — there’s nothing physical, other than the keys, to hand over at the time of sale. Particularly in early land grab days, a fraudster could easily have forged documents that allowed them to “sell” a property they did not own. A system of public records indicating who owned each parcel of land allowed individuals to buy and sell property with the reasonable expectation that no one else would appear after the fact with a valid claim to the land. Without public property records, title insurance could not exist, and property transactions would simply be too risky to undertake.

Just how public the records are tends to vary. While some counties have made their records searchable online, others maintain only hard copy records. In Chicagoland, for example, the Cook County recorder’s office maintains an easily searchable database. In some counties, local papers make a routine habit of publishing the details of property transactions, making them essentially searchable for anyone with a newspaper subscription. 

When a title company begins a title search, they start with the relevant recordkeeping body in the jurisdiction in which the property is located — usually a county recorder’s office, either online or in-person. The title or settlement agent examines the available records to ascertain the property’s rightful owner, the liens or other judgments against the property, any mortgages taken out against the property, and the property taxes due. 

Clearing Title Encumbrances

Once the title or settlement agent has assembled all of the relevant property records, they begin the process of title clearance — eliminating any encumbrances, also known as defects or clouds on title. In some cases, this process is merely a matter of recordkeeping cleanup — the satisfaction of an old lien may not have been properly recorded, or an undisclosed easement may pop up. In many cases, however, it involves communicating with the seller and the seller’s agent to ensure that an issue is resolved and documentation properly filed. 

Issuing The Title Commitment And Title Insurance

Once the title search has been completed and any issues resolved, the title company issues a title commitment. This document, also known as a title binder, or a preliminary title report, comprises the title company’s obligation to provide title insurance on the property. If there are any defects or encumbrances that the title company could not resolve during the clearance process, they will be specifically disclosed as being excluded from the policy. For example, if a very old lien has been placed against the property, but the company holding the lien has long since gone out of business, making it impossible to satisfy the lien or have it removed from the records, the title company may make a specific note excluding that lien from the policies of title insurance it issues. 

Understanding the title commitment, and its exclusions or exceptions, is an important part of the homebuying process for any buyer. After all, anything that has not been included in the final policy may be the homeowner’s responsibility at some point. 

Assuming the sale proceeds, the final step is for the title company to issue owner’s and lender’s policies of title insurance to the buyer and the buyer’s mortgage lender respectively.

Landtrust Title: Your Partner for Results

When your real estate agent works with Landtrust Title, you get a partner for results. We do things differently than other title companies — whether it’s personalized support, convenient closing times that meet your schedule, or quick and easy payment methods ensuring everyone gets paid right away, our attention to detail will help ensure a smooth transaction. We are happy to answer any and all questions you may have, and we’re obsessed with making your experience so seamless, you don’t even have to think about it. If you have questions about what to expect when your real estate deal closes, Landtrust Title Services can help. Please contact us today at [email protected] or by phone at 312.528.9210.

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