Homebuyer Tips | Why Read Your Title Report
The Title Report is often the most overlooked part of your disclosure packet but it’s definitely something you need to spend a little time on.
Why Read Your Title Report
Most people want to focus on pest reports and home inspections more than reading the title report. However, not paying attention to the title report can cause you lots of problems later or cost you tens of thousands of dollars later on. Even though it’s a boring document, the hours you’ll spend reading it will be totally worth it. Here are some of its parts you should focus on:
1. The owner’s name and how they’ve held title
This is the first and most obvious thing you’re going to see on the title report’s first or second page. Most people hold titles in Fee Simple– the most common type of ownership. Fee Simple entitles the homeowner to the full ownership of the property, including the land and any other structures that will be built on the land.
Most single-family homes fall under this type of ownership. On the other hand, condominiums and planned developments may fall under different types. As a general rule, if you see anything other than Fee Simple, make sure you talk to your title rep and agent about what it could potentially mean for you.
2. Exclusions of the Title Insurance Policy
This means that escrow and title companies are going to issue an insurance policy saying that no one else is going to make a claim to your house once you buy it, except of course, your loan. There are also exclusions because there are some things they won’t insure against such as your property taxes, county taxes, redevelopment fees, and of course, the owner’s mortgage or loan.
Once you have these cleared and you’re ready to take your title, it is the responsibility of the title company to have these cleared so there won’t be anything listed in the exclusions.
3. Easement Agreements
An easement is a term in real estate that refers to the agreement between the current owner of the property with another party to have access to the property.
Common types of easements include utility easements, sewer easements, and power line easements, among others. These may have been placed on the title a long time ago and they may be very hard to remove. As a new homebuyer, it is your responsibility to know who has access to your property and for what purpose.
4. Legal Description
As you keep on reading your Title Report, another part that you may find challenging to read is the Legal Description. The Legal Description basically describes the boundaries of your lot. As you keep scrolling further, you’re definitely going to see a bunch of maps. These maps are very important since you’ll be able to visually see where certain easements lie, where the fence lines are, if there’s a driveway that cuts across and where it should be.
As the buyer, you have to check if what’s on these maps are the same as what’s actually in your property. If not corrected, differences in the maps can become bigger problems later on. For example, when 1) you’re getting insurance or 2) when you’re trying to close the loan.
Pay attention especially to the latter since the lender is going to look at this very specifically to make sure that nothing’s going to affect the property and its value.
5. Natural Features
Another very important thing you should look at is the creeks, rivers, underground wells, as well as streets and roadways, and check where your boundaries lie. These are very important in some cases like if you’re buying a property on top of a hillside like in Oakland and Berkeley Hills. In these two areas, for example, you’re also responsible for creating a defensible space in case of a wildfire. In addition, yearly inspections are also being conducted to make sure property owners are complying with that rule.
To make sure you pass the inspections, you need to first know how much land exactly you are responsible for, what natural features are in them, and what are your state or city’s laws about them that you need to be in compliance with. These laws and rules on natural features also vary depending on where you’re buying from but one thing may stay the same– they can cost you a lot of dollars down the line if you did not pay attention to them early on.
A few last words:
That’s it for my quick overview of the five parts of the Title Report you need to pay attention to. If you’re planning to buy a home, make sure that you’ve read that Title Report and looked at those maps before making an offer. This could mean the difference in thousands and probably tens of thousands of dollars if you are to own that property later on.
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