What's the Difference Between a Title and a Title Report?
Understanding the difference between a title and a title report is crucial, especially when buying or selling real estate. While closely related, they serve distinct purposes. Think of it like this: the title is the actual ownership, while the title report is a document that details that ownership.
What is a Title?
A title is the legal right to ownership of a property. It represents the bundle of rights associated with owning that land, including the right to possess, use, enjoy, and dispose of the property. This is a legal concept, not a physical document. The title is essentially the proof of who legally owns the property.
What is a Title Report (or Title Commitment)?
A title report, often called a title commitment, is a document prepared by a title insurance company. This report summarizes the current status of the property's title, based on a thorough search of public records. The report details:
- Ownership History: It traces the history of the property's ownership, showing previous owners and any transfers of ownership.
- Encumbrances: This section lists any liens, mortgages, easements, or other claims against the property that could affect the ownership. This includes things like unpaid taxes, homeowner's association fees, or existing mortgages.
- Exceptions: Any exceptions to clear ownership are noted here. These could range from minor issues to serious problems that could affect the buyer’s ability to take full ownership.
- Surveys: While not always included, the report may reference a property survey and whether it aligns with the recorded legal description of the property.
Frequently Asked Questions (FAQs)
What information does a title report provide that a title doesn't?
A title is an abstract legal concept. The title report is the tangible document that provides evidence of the state of that title. It gives specific details about the ownership history, any encumbrances, and any potential problems that might affect the transfer of ownership. It's the detailed investigation that supports the claim of clear title.
Is a title report necessary to buy or sell a property?
In almost all real estate transactions, a title report is essential. Lenders require it to ensure they're lending money on a property with clear ownership and no hidden issues. Buyers need it to protect their investment and ensure they are receiving what they paid for.
What if there are problems revealed in the title report?
If the title report reveals problems, such as liens or disputed ownership, these issues must be resolved before the sale can proceed. The buyer, seller, or both may need to take steps to clear the title, which could involve legal action or negotiations.
What's the difference between a title report and a title insurance policy?
A title report is a summary of the title search, identifying potential problems. Title insurance is a separate policy purchased to protect the buyer (and/or lender) from financial loss due to title defects or claims that might arise after the closing. The report is a diagnostic tool; the insurance is the protection.
How long is a title report valid for?
Title reports have a limited period of validity, typically 30 to 90 days. This is because the title situation can change rapidly with new liens or claims being filed. A new report is needed if the closing date is beyond the validity period.
In conclusion, while the title represents ownership, the title report provides the critical information needed to verify and ensure that ownership is clear and transferable. They are inextricably linked, with the report being the key tool used to understand and manage the title.
