When a prospective buyer and seller enter a purchasing agreement for a piece of real estate, one of the steps required for formally completing the transaction is a property title search. A title search essentially verifies that the prospective seller is the legal owner of the property. Although ownership of the property may appear obvious, claims or liens on (against) the property may exist from others, or the seller might be in the process of bankruptcy. 

Title searches are a necessary means of assuring and proving that a seller is the owner of real property.

The title search is one of many potential steps involved in these real estate transactions, such as property inspections or property appraisals. The title examination and inspection processes are performed by professionals who review all records related to the property, such as mortgages. If the findings of the search indicate that another party has a valid “claim” to the property, the title is not considered clear; therefore, the buyer is freed of any obligations contained in the provisions of the purchase agreement. 

Who Performs Title Searches? 

Standard “30-year” title searches are primarily conducted by title companies or attorneys, who act as third-party service providers to real estate transactions. These entities typically will check sources that record federal or state tax liens, domestic court judgments, county land transactions, and others for any potential “defects” or encumbrances. A finalized title search will confirm the seller(s) is the vested owner of the parcel free of any judgments or liens and disclose the existence of any loans and the property tax status. 

Ownership & Encumbrance Reports (O&E)

An alternative to a full “30-year” title search, an ownership and encumbrance (O&E) report is a quicker and less expensive means of checking for potential defects or encumbrances associated with a property. Sometimes referred to as “pencil searches,” O&E reports are often conducted on behalf of property investors, such as those bidding on a foreclosure at a county auction. After reviewing an O&E report, a prospective buyer will be reasonably confident that they will not encounter title problems later on. 

For example, PropertyOnion now provides these title search services in Florida for only a fraction of the price of a full 30-year title search, and the report is ready in one or two days. Some of the information typically contained in these reports include: 

• Deed information
• Chain of title details
• Federal, state, or county tax liens
• Homeowners Association Liens (HOAs) 
• Utility liens and much more.  

Understanding Title Insurance 

Title searches are a necessary means of assuring and proving that a seller is the owner of real property. Title insurance is a means of protecting other parties involved in the transaction from any future damages or losses. Title insurance provides coverage for any unforeseen financial or legal ramifications that may result from defending against defects. Like a homeowner’s insurance policy offers protection from losses associated with theft or storm damage, title insurance protects the owner’s investment in the home if unknown claims to the title arise. 

Title searches are generally a requirement for properties that are subject to restrictive covenants, such as those involving homeowner’s associations (HOAs), which often apply to condominiums. HOAs vote on rules that all of the property owners must abide by, such as prohibiting the property from being used for commercial purposes. 

Those who belong to HOAs are also accountable for HOA fees. If the current property owner has unpaid HOA fees, the association may file a lien, which a title search should reveal. Another common concern or encumbrance that a title search may reveal is unpaid property taxes. 

This right to claim an interest in a property may apply even when the deceased spouse has already sold the property.

Keep in mind that many older properties have changed hands dozens of times, dating back for more than a century. Some of the risks that might arise include: 

• Fraud involving the false impersonation of the property owner
• Forgery involving legal documents, such as deeds
• Clerical errors by local agencies 
• Unknown or undisclosed heirs or spouses
• Liens from unpaid child support or taxes

Title insurance policies will provide compensation for legal expenses incurred defending against claims and any related financial losses. The two primary types of title insurance policies either protect the owner or the lender.

Owner’s Policy 

The Ohio Department of Insurance (ODI) explains that the provisions of owner’s policies contain a description of the property and any “limitations” that apply to the owner. Limitations are liens or other claims that were disclosed within the purchasing agreement. 

The ODI encourages all homebuyers to purchase owner’s title insurance to protect themselves from unknown risks. Although incidents are rare, errors sometimes occur during the title transfer process. 

Lender’s Policy

The other type of title insurance is a lender’s policy or loan policy. This policy protects lenders and is often included in the mortgage loan agreement. 

What Is the Difference Between the Title and the Deed? 

Often, people will incorrectly use the terms “title” and “deed” interchangeably when referring to the official document used for proving property ownership. Unlike the title, the deed is a physical document that is signed by the seller and notarized. The title is best described as a concept that indicates who legally owns a property. 

After a property is sold, the title company will ensure that the deed is recorded by a county agency or court. The deed contains the type of ownership that applies to the property, which is one of four options: 

• Sole ownership: A sole owner is an individual who exclusively holds the property’s title. 
• Joint tenancy: When two or more individuals equally own a property, the title is jointly held. 
• Tenancy in common: When two or more individuals own a property in unequal shares, the ownership is tenancy in common. 
• Marital property: When a property is acquired during a marriage, the title is considered as community (marital) property. 

A deed must contain some basic information, including the identities of the current owner (seller) and the new owner (buyer). The existing owner or “grantor” must sign the deed in the presence of a notary.  

The title search process is an important proactive measure and title insurance provides protection from potentially costly losses. 

Real Estate Transfers Without a Deed

The Ohio Bar Association explains that private property may be transferred without a deed in cases where the government acquires a parcel through eminent domain. The power of eminent domain applies to local, state, or federal governments, which may assume control of property for public use. With eminent domain, the government will “justly” compensate the current property owner, which in Ohio is fair market value. 

Spousal or “Dower” Rights

Ohio law extends “dower” rights to spouses. Here, the spouse of an individual who dies may make a claim to a property — although they are not named on the deed. This right to claim an interest in a property may apply even when the deceased spouse has already sold the property. For this reason, any spouse of a property owner must sign the deed to formally relinquish any future interest claims to a property at the time of a sale.  

Closing Costs

The finalization of a real estate sale or transfer is a process known as closing. The process of closing involves a variety of transactions performed by service providers who are compensated using closing costs. Typical closing costs in Ohio may include title service fees, real estate transfer taxes, the owner’s policy (title insurance), county recording fees, attorney fees, and more. 

The title search and title transfer fees in Ohio typically equate to roughly 0.26% of the property’s sales price. With the median home value in Ohio being roughly $227,000, these costs are approximately $590. 

The Importance of the Title Search Process 

Although the title search process is often viewed as an unnecessary formality, those who are purchasing a property in Ohio may ultimately appreciate it. The title search process is an important proactive measure and title insurance provides protection from potentially costly losses.