What’s the Point of an Abstract of Title?
Simply put, an abstract of title is a written record of the property’s legal history. So this file will include all legal documents that involve the property, ensuring you’re familiar with everything you need to know about the ownership of the house over the years.
If you want the best chances of protecting yourself from the discovery that someone other than the seller owns the home you want to buy, you should get a copy of the abstract before you officially purchase a piece of property.
You probably get the idea now that an abstract of title is a listing of legal documents associated with the house you want to buy. But exactly what kinds of legal documents can you expect to see when you view this file? Well, the documents you’ll see are listed chronologically, so you’ll typically view the original grant deed first. This type of deed is used to transfer ownership of real property from one person to another.
The grant deed features the name of the grantor, or the person transferring the property, as well as the name of the grantee—the person who the property is being transferred to. It also has a legal description of the property, such as its exact location. So at the very least, the abstract of title will tell you the names of each person who has owned the property and how long they owned it. It will also state the amount each buyer paid for the mortgage and property taxes every time the property was sold. This history of deeds is referred to as the chain of title, and it’s good to know before you buy a house.
After the first grant deed, the abstract of title will likely list several other documents that show any legal changes made to the property over the years. This includes tax liens, HOA liens, child support liens, etc. Other documents you might see on the abstract of title include the following:
- All types of property deeds
- Tax sales
- HOA restrictions
These are just the most common documents you’ll see on your abstract of title as you prepare to buy a parcel of real estate in the United States. Having access to these should help uncover any title defects on the property before you complete your real estate purchase.
During the home buying process, you might have heard you’re supposed to get a title search. When this happens, the title company will go through public records to review the recorded documents associated with the house over the years. If that sounds like an abstract of title to you, you’re not far off, as the two are pretty similar.
However, there are some differences to note. First, the typical title search only goes back about 40 years. But an abstract of title goes back to around before the house was built, right up to when the government issued the land grants. In fact, depending on the age and location of your house, an abstract of title could include information on mineral rights—meaning you could make a profit if you find that the property features oil, natural gas, or silver! This could be a good reason to get an abstract of title, especially if you suspect the land you’re on might be valuable due to certain minerals.
Another difference between the abstract of title and title report is price. In general, it’s more expensive to get an abstract of title than it is to hire a title agency to perform a title search. The abstract also takes longer to complete. And keep in mind that it’s never required for you to buy an abstract of title. On the other hand, most lenders do require you to pay for a title search before you buy a house, because you need a title report before you can buy the required title insurance policy.
Also note that the abstract of title is a condensed history of all the documents filed with the county recorder over the years. The listing of the legal documents is meant to rule out any title defects. However, sometimes mistakes can be made and the agency preparing the abstract could miss important documents on the home’s history.
This is why you also need title insurance after you get an abstract of title completed. In fact, your lender will require title insurance, whether you get an abstract of title or a regular title report. More specifically, lenders require buyers to get lender’s title insurance. This type of policy protects the bank in case there are any title defects that would result in financial loss due to the home not legally belonging to the buyer. But you should also get owner’s title insurance. This way, if it turns out someone else legally owns the home, you won’t lose your entire investment, as your insurance policy will kick in so you can buy another property.
Now that you know the point of an abstract of title, it’s time to decide if you should get one. As mentioned above, it’s not typically required to get one when you’re buying a house. However, it’s often recommended to get one if you have the time and money for it during the home buying process. It’s especially helpful if the property is older and might have a legal history—or something unique like mineral rights—that the average title report might miss.
If you don’t have the money or time to get an abstract of title completed, you can simply stick with the more common title search. This way, you’ll still get a good idea of all the legal documents related to the house, and you can get the required title insurance before closing day. If you’re working with a real estate attorney for legal advice during the home buying process, be sure to ask him or her if you should get an abstract of title. You can also ask your real estate agent this question before you go into escrow.
Now you know why our title division is named LemonBrew Abstract! If you don’t have a real estate agent yet, come to LemonBrew to get matched with a Partner Agent you can rely on for help from the home search to closing day! We also offer title insurance and closing services through LemonBrew Abstract, which you’ll need whether you get an abstract of title or a title search before getting insurance. So contact us today if you have any questions about the title search or other important aspects of buying a home!