If you’re interested in a property and plan to purchase it, you should review the abstract of title.
Examining this document can provide a lot of information about the building or parcel as well as reveal potential risks associated with the title.
Because errors or omissions in the property title may result in monetary damages due to liens or other causes, understanding the status of the property and using title insurance to protect your investment are two key actions.
Here are the top things you need to know about the abstract of title.
1. What is an abstract of title?
An abstract of title is a record of the title history of a property.
It will include all transfers, liens, and legal actions that are connected to the property.
This is a crucial document for purchasers or investors of a property because it is a summary of a title’s status.
It is also often required in order to obtain title insurance.
2. What does an abstract of title contain?
An abstract of title is often a fairly thick pile of paper.
Here’s what the information may contain.
If any liens exist against the property (mechanic and repair liens or liens for monies borrowed against the property, etc.) then they should be listed.
If property taxes are owed, there may be tax liens on the property or may be going to a tax sale.
These would take precedence over any other liens, and you may lose the property if they are not paid.
If you don’t pay your HOA dues, then the association could put a lien against your property, and this will show up on your abstract of title.
HOA restrictions and covenants:
Any restrictions, rules, or regulations designating what you can or cannot do with your property will show up on your abstract of title as well.
Surveys and notes:
If you have any encroachments on your property (ex: your neighbors building their fence a foot onto your property), then this information would show up in the surveyor’s notes and be contained in your abstract of title.
Most often, properties will have easements for utility companies, which allows them access to the property for the repair of sewer, water lines, etc.
Sometimes, people will have easements on their land that allows people access for other reasons (for instance, if your neighbor needed to use your property to get to theirs).
These are important to have knowledge of because you never want to build something on your property that could ultimately impact the easement.
3. Who is the abstractor?
Initially, abstractors were attorneys, but today, abstractors are more often a separate profession.
This individual studies under experienced abstractors and may even be licensed by the state depending on where they live.
For example, Oklahoma abstractors must be licensed by the state board.
However, there are still some areas where attorneys earn commission on the title insurance product, and in this instance, they would be the person who prepares the abstract as well.
In either case, an abstractor will typically research the property by searching county records and by using records stored in abstract plants (sites managed by title-insurance companies to hold copies of documents).
As a result, this individual must have sharp analytical skills and be able to recognize which documents are erroneous or void.
4. How does a title report differ?
A title report is a huge mass of information that was taken from public records.
Like an abstract, the title report includes the following:
Information about both the property and the owner
A legal description of the property
Notice of any liens or encumbrances against the title
Tax information, including whether back taxes are owed
Information about the existence and location of easements
A list of covenants, restrictions, conditions, historical rules, and oversight
Unreleased judgments or liens against the current titleholders.
An abstract and title report are very similar, but may have some differences depending on the state and the title company.
Sometimes, it’s just a matter of terminology.
Other times, it’s a difference in the depth of the search undertaken.
For example, some states, like Oklahoma and Iowa, are abstract states.
Before issuing a title insurance policy in these states, a title company will require a full report (the abstract) of every document in the public record dating back to the original grant deed.
The abstract could easily go back over 200 years and can be incredibly time-consuming to complete (some are 4 inches thick when printed!).
Alternatively, a typical title report in a non-abstract state may only cover the past 40 years.
As you may imagine, there is a huge difference in the cost between these two types of reports.
Be sure to speak with your title company to see what is required in your particular circumstance.
5. What’s the difference between an abstract of title and a deed?
A deed is a document that is supposed to prove legal ownership by the bearer of a piece of property.
It doesn’t guarantee that the title is perfect, but rather it is used to pass the element of ownership and property rights (imperfections and all!) of a piece of property.
Similarly, an abstract does not guarantee a clean title or make a statement as to its validity.
It just provides a summary of all the records pertaining to the title, including all deeds.
6. How does a chain of title differ?
The chain of title refers to the sequence of formal documents that detail all transfers of ownership of a piece of property over time.
An abstractor uses this information to create the abstract of title, which is a summary of the chain of title.
It is an account of the title’s history, and all important information about the property should be included in the abstract.
7. What’s the difference between an abstract of title and title insurance?
An abstract of title is a full summary of all consecutive grants, conveyances, wills, records, and judicial proceedings.
It is prepared by an abstractor who searches the chain of title as recorded or registered by the county recorder, county registrar, circuit court, and/or other official sources.
They then summarize the various instruments affecting the property and arrange them in chronological order of recording, starting with the original grant title.
While the abstract does not guarantee or ensure the validity of the title, it does provide a condensed history.
It discloses those items about the property that are of public record and puts them in one place for review.
If something was to be missed, an abstractor would be liable for damages caused by his/her negligence in searching public records.
On the other hand, title insurance is a comprehensive indemnity contract in which a title insurance company promises to make good on a loss that arises from defects in title to real estate or any liens or encumbrances thereon.
It differs from other types of insurance which promise to protect from a future loss (i.e. fire accident or medical need) and instead protects a policyholder from a loss that may have already happened (forged deed somewhere in the chain of title).
Here are some of the things that a title insurance policy may protect the insured against:
Forged documents such as deeds, releases of dower, mortgages
Undisclosed heirs; lack of capacity (minors)
Mistaken legal interpretation of wills
Misfiled documents, authorized acknowledgments
Confusion arising from the similarity of names
Incorrectly given marital status; mental incompetence
8. Who may obtain an abstract of title?
Abstracts are expensive and bound documents.
The entity who orders the abstract depends on the state and title company involved.
In some circumstances, only the real estate attorney who certifies a title order is able to obtain them.
In other cases, the buyer may be able to order an abstract directly from an abstractor.
That said, anyone is able to read the legal documentation that is in an abstract because it is of public record.
9. What does my abstract of title not do?
As noted above, an abstract of title does not guarantee that your title is clean.
It isn’t a statement of validity – it’s just a summary of the records on file about your title and nothing more.
As a result, it can and will include any errors that are already on file.
So, if misspellings of names, incorrect dates, and other common data entry errors were recorded from other documents, then those will be included in your abstract also.
That said, abstracts do not bring forgeries to light.
Thus, the abstractor will only be liable for damages caused by any negligence when assembling the abstract itself.
If their research is faulty (they fail to find something in public records), then they could be responsible for negligence.
Otherwise, they are not responsible for any problems with the property’s documentation.
10. How long does it take to get an abstract?
The average length of time is 1 to 3 weeks.
Although, this can vary, and you may want to check with the abstractor you hire for a time estimate.
11. How do I get an abstract of title?
Are you looking to get an abstract of title for your property?
Here are the steps you should know.
Contact a title company or real estate attorney.
Often title companies will employ abstractors who can research the history of your property and put together an abstract.
You can also contact a local abstractor or attorney or use an online service (ex: TitleSearch or AmericanAbstract).
Pay the applicable fee.
On average, you can expect to pay between $350 and $500 for an attract of title.
Because no two abstracts are the same, there is no flat fee.
You should ask around to get a quote for your property.
Review the abstract.
Depending on the complexities of the property and the encumbrances or liens listed, this may take some time.
That said, the abstract will clearly list any claims against the property, the land survey, or the boundaries of the property or current titleholder.
This is essential to know if you’re looking to purchase real property or if you’re the current owner.
Unless it’s unavailable for a property, prospective buyers should always obtain a copy of the abstract of title before negotiating a purchase.
If you do not have access to your abstract of title, you can work with a title company or the county recorder with jurisdiction over the property to obtain or recreate the abstract.
You can also contact a local real estate attorney for legal advice.
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Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.