Intro to the Chain of Title
The Basics Chain of Title
In real estate, the chain of title is the history of the property’s ownership. When a property gets sold, the title gets transferred, and these transfers form the chain. Researching the title chain is among the tasks performed by a title company when a buyer signs a contract to purchase a property. The chain of title for any property gets found in the relevant county recorder’s office, though there’s no reason you can’t conduct your search to determine the chain of title. All the information is in the public record. Keep in mind that state laws governing the recording of real estate transfers differ, so the chain of title process in one state may vary somewhat from one chain of title process to another.
Chain of Title Documents
Formal documents maintain the chain of title. The chain ends with the most recent record affecting the property. Types of documents included are:
- Transfer Documents
- Financial Documents
- Involuntary Liens
- Covenants and Restrictions
Transfer documents (deeds) document the transfer of ownership conveying the property from the seller, or grantor, to the buyer or grantee. The deed also includes a detailed description of the property.
Financial documents (mortgages and deeds of trust) are voluntary liens, as the creditor agrees with a lender to borrow money to purchase the property. Until the debt is paid off, generally in 15 or 30 years, the lender has the property title. Once the mortgage gets paid, the former creditor owns the property “free and clear.” The mortgage or lien’s date determines which lien is a priority for payment if there is more than one lien in competition. A deed of trust, also known as a trust deed, assigns the property to a trustee. The trustee holds the title as security for a loan between the lender and the borrower. In such a case, the lender will become known as the beneficiary and the borrower as the trustor.
Involuntary lien documents include liens, lis pendens, and tax liens. As the name implies, involuntary liens arise without the owner’s consent, usually due to nonpayment of debts. Examples of involuntary liens include property tax liens when local property taxes don’t get paid, income tax liens, failure to pay the IRS, judgment liens from a creditor, ordered by the court, and mechanic’s liens. Contractors file the latter if the owner does not pay for work done on the property. Involuntary liens “cloud” the title and require payment before the property changes hands. In cases, the property sold at auction to satisfy the lien—a lis pendens notice that somebody filed a lawsuit regarding its title or ownership.
Covenants and restrictions are documents creating constraints on the use of the subject property. Such limits may include limits on the types of improvements made to the property, benefits of the property, and property occupancy. Older homes may have covenants not permitting property sale to people of specific racial or religious backgrounds, but these covenants are no longer enforceable.
Easements, also known as rights of way, are documents affecting usage rights. There are various types of easements, including:
- Utility easements — allowing utility companies access to the property to maintain electrical lines, water/sewer lines, and the like. These are the most common types of easements and affect most properties.
- Private easements — a private easement allows another party, usually a neighbor, access through the property. It may mean direct access, such as a shared driveway, or non-direct access. An example of the latter is solar access, which means the owner cannot build or plant anything on the property that would affect a neighbor’s solar collection.
- Easement by necessity — in some situations, the only way a neighboring landowner can access their property is by going through an adjacent property. Known as an easement by necessity, and the property owner cannot interfere with the neighbor’s ability to access their land.
Other documents involved in the chain of title may include:
- Death certificates. When the property passes to a joint tenant through the right of survivorship, this joint tenant is generally the decedent’s spouse.
- Affidavits, documents that affirm a fact related to the property
- Correction deeds get used to correct an error in a previously recorded document.
Chain of Title Breaks
Sometimes, there is a break in the title chain, and it occurs if the title transfer was inaccurate – or fraudulent. Human error is often to blame, especially if paperwork gets filed in haste. That’s usually the case when lawyers and lenders get overwhelmed by the sheer amount of business during real estate booms. Common errors include;
- misspellings of the grantor or grantee’s names,
- incorrect legal descriptions of the property,
- lack of signatures on the deed,
- mistakes in when the chain of title documents got recorded, and even filing in the wrong county.
When there is a break in the chain of title, correction is necessary. The simplest way to correct this is to have the property owner go to court and seek quiet title action. Depending on the break’s nature, a judge can rule that the break is not relevant and no longer exists. However, if the break is known to have resulted from a particular party, the owner can seek out the party and have them fill out a quitclaim deed, giving up any rights to the property they may have had.
The Basics of E-recording
In 2018, the U.S. Treasury offered several recommendations to improve the electronic closing and recording process. The Treasury said recording jurisdictions that don’t recognize and accept electronic records should implement the necessary technology updates to process and record these documents and pursue digitization of existing property records.
Here’s a FAQ provided by eRecording Partners Network that breaks down e-recording, how the process happens, what companies need to e-record, and the benefits.
Is E-recording legal?
As of 2015, all the states in the nation have approved one or both of the following acts:
- The Uniform Electronic Transaction Act, or UETA, establishing the legal equivalence of electronic records and signatures to the traditional paper documents and wet-ink signatures
- The Uniform Real Property Electronic Recording Act, or URPERA, authorizing local land records officials to accept records in the new electronic format.
The first e-recording was processed in 1999, 20 years ago. The number of jurisdictions across the nation that accept e-recording continues to increase. According to the Property Records Industry Association (PRIA), over 85 percent of the U.S. population resides in jurisdictions that e-record. That’s almost 2,000 jurisdictions nationwide.
The Physical Process
The best way to describe the e-recording process is to think of the internet as an electronic version of your current courthouse runner or FedEx package. E-recording is another document delivery option. The documents are scanned, become images, and are submitted securely via a secure internet website to the courthouse. The image is recorded at the courthouse and returned to you through the same secure internet connection.
- Documents are scanned and submitted via the internet.
- The actual recording still gets done by the recorder’s office in
- The recorder’s software system. (LRMS)
- Submitter receives an image with the recording stamp and information displayed, representing the original document.
- E-recording takes minutes or hours versus days or weeks.
- Rejection is reduced and turned around more quickly.
What Do I Need?
To use e-recording, you need a computer running a current internet browser, access to a scanner, and access to high-speed internet. Many of the popular title and closing software packages also integrate with e-recording vendors to help you save time and steps. Also, you need a contract in place with an e-recording vendor. The agreement will set you up as a qualified submitter and outline the recording and submitting fees’ payment process.
How Does It Work?
With most vendors, there’s no software buy, install, or set up. Once completed, you scan the documents and store them on your computer. You then access the vendor’s web portal and upload your scanned images. The county may also require you to enter some identifying information about the documents for tracking purposes.
The system will encrypt and securely transmit the documents to the courthouse. Once received, the jurisdiction records the documents and returns them securely to you with the recording stamp and other appropriate information. This process typically gets completed in minutes to hours versus days or weeks.
Most people can then print out the first and last page of the recorded document and attach them to the original documents, which never left your office. This package can then be sent to the final destination, whether the title insurance company, lender, or new owner.
Why Submit Documents This Way?
There are several reasons to consider e-recording. The biggest reason is to reduce the turnaround time. The shorter turnaround time is also an advantage if a document gets rejected. You can address issues more quickly and resubmit documents the same day. Faster turnaround time also reduces the gap period. Submitters who deal with multiple counties can eliminate the need to have escrow accounts at each county or issue and process individual checks for each transaction. Some submitters have also reduced their delivery and return fees by e-recording, but it depends on how your office business processes get set up. E-recording also creates an electronic record of when documents were submitted to the county and returned to help you comply with Pillar four of ALTA’s Best Practices.
What If the County Rejects Documents?
If a document has gotten rejected, you will not get charged for recording fees or the transaction fee. The record gets returned to you with a rejection reason from the county. You can then make the needed correction and resubmit the document. If one form of a multi-document package gets rejected, the whole package is returned to you to keep the document recording order’s integrity.
The most common reasons for rejections are image quality and not meeting the county document margin requirements. Each county has its margin requirements based on where they place their stamps. Many vendor systems store each county’s criteria by document type and display an on-screen guide or template that shows those specific requirements. If potential issues get identified, the software provides you tools for error correction within the software, so you do not need to rescan the document.
Delving More Deeply
If your house is ancient or you wish to learn more about the property’s ownership before somebody built a house, much will depend on your state’s homestead laws. The formal chain of title ends when you can no longer find information on the property’s sale history, but that does not mean it is the title chain’s right end. For more information, however, you need to become a history detective. That development house built in the 1950s sits on a parcel of land – a subdivision – that may have belonged to a farm family for generations. Finding out more may involve visiting your county or city’s historical archives or visiting old cemeteries to look for former owners’ graves. You may also want to check local newspaper archives and immigration records. The bottom line is that the chain of title offers a history of the property, and learning that account is often worthwhile in its own right.
Why Real Estate Documents Are Recorded
Imagine Billy Boaster buys a home, moves in, and yells out loud, ‘This is my house,’ giving notice to the world that he is the owner. He leaves to take a vacation, and Sara Squatter walks into the home and yells, ‘This is my house.’ When Billy returns, how can he prove that he did not sell the home to Sara?
A system of declaring property ownership like that would cause serious legal problems. Luckily, we have a solution. This lesson will help you learn how real estate title documents, which protect property rights, are recorded.
All Billy Boaster needs to prove his ownership is a deed. A deed is a legal document signed by a property owner that transfers rights to the property to a new owner. And with a deed, Billy doesn’t even have to yell to declare his ownership. Throughout the U.S., local county recording offices file deeds in an official public record. When a deed gets recorded, it services as notice to the world with legal property rights.
Where Real Estate Documents Get Recorded
Every state gets comprised of counties. Most counties elect or appoint a recorder. A recorder must maintain all of the real estate records for properties located in the county. Depending upon the county’s size, the recorder will oversee an office and employ a staff to administer their duties. The offices’ names vary but get commonly referred to as county clerk, recorder of deeds, or registrar’s office.
The recorder’s office primarily records deeds; however, other documents used to secure property rights also get recorded.
Preparing Documents For Recording
Before a document gets recorded, it must meet state and local requirements. A recording fee, and in some cases a transfer tax, must also accompany the document. States and local governments establish document recording fees.
How Documents Get Recorded
Every recorder has specific recording requirements. Most recorders will allow documents to be submitted in person, by mail, or in recent years electronically through an e-recording vendor. If it gets determined that a record does not meet the necessary standards, it is returned to the document submitter to be corrected. A document submitter is an individual or company responsible for having the document recorded and can include a property owner, attorney, or title company.
Once a document is approved, it is recorded and indexed. An index is a system of organizing documents chronologically by category and I.D. The document is also issued a unique identification code. The identification code can be in the form of letters, numbers, or combinations of the two. In some counties, recorders index deeds in a deed book, and each deed is given its page within the book. The date, time, and fees paid for the recording also get logged.
After the original document gets recorded, it then gets returned to the document submitter. A copy of the document is archived and becomes an official part of public records.
How Does Recording of Real Estate Records Work?
Just as in any transaction, it keeps an official paper trail and record of any sale or change in ownership that is an essential part of verifying a given property or purchase history. Recording – the act of putting a document into official county records – is a necessary process that provides a traceable chain of title to a property. More than 100 types of documents can be recorded, depending on the type of property and kind of real estate transaction. The most common are mortgages, deeds, easements, foreclosures, estoppels, leases, licenses, and fees, among other documents.
The most important real estate documents list ownership, encumbrances, and lien priority. These get used for maintaining proper real estate transactions.
- A recording is an act of putting a document into official county records, especially for real estate and property transactions, that provides a traceable chain of title.
- Historical documents do not establish who owns a property. Instead, these public records get used to help resolve disputes between parties with competing claims to a property.
- To understand which documents have been or must be recorded, check with your state and county recording division.
Real Estate Recording Systems
In reality, recording systems vary by state and get established by individual state statutes. Not all states use instrument recording to track title; some states use land registration systems instead. In any case, it is the local county’s responsibility or the state to make sure that these official documents get kept on file.
Historical documents do not establish who owns a property–this instead shows the asset’s legal owner. Preferably, recorded documents get made public to be used to help resolve disputes between parties with competing claims to a property. For instance, if two different claimants have conflicting deeds to a property, the date of recording can get used to determine the ownership timeline. In most cases, these public records provide clarity, and typically the owner with the most recent deed would be considered the rightful owner. If there are any issues, it would be wise to seek legal counsel.
In the case of mortgage liens, courts use a recording date to determine the priority for which liens should receive payment first.
To understand which documents have been or must be recorded, check with your state and county recording division. Some states have also passed recording acts, which are statutes that establish how official records get kept.
Ultimately, recordings provide information for both government authorities and the buyers and sellers of real estate property.
When you’re looking into buying real estate, it pays to dig up as much information as you can about the property. It can be helpful when it comes time for you to negotiate a price in case the seller doesn’t disclose something, either intentionally or unintentionally.
Searching property records can be much work, but you can find out a wealth of information. You can turn up valuable data to use when putting together a purchase offer by doing a little sleuthing in the public records. If you rely on multiple listing service (MLS) data alone, you could be operating without all the facts, and that can affect how much you pay, dollar for dollar.
What You Can Learn From Public Records
The information available as a matter of public record includes several details about a property, such as an address, owner, lot number, and square footage. When a property gets sold, the information recorded may include the transfer of ownership, sale price, assessed value, tax liens, and square footage changes, if any.
Search for property tax records, and you can find out the name of the owner, their tax I.D. number or parcel number, the amount of present taxes, and what’s gotten paid.
You can find out how long the current seller has owned the home, how much they owe (useful to determine a short sale), what improvements they’ve made without a permit, and whether the property is in foreclosure, among other pertinent facts.
If you’re using a buyer’s agent, your agent can also find out exactly how long the property has been for sale, which is useful because the number of days on the market affects pricing. An agent can also look up the original sales price, whether the price has ever gotten reduced or fallen out of escrow, and whether the seller canceled a listing or switched agents.
Public property records can give a more in-depth insight into the reason behind a sale. For example, you may learn the sellers are getting a divorce. A divorce-when-selling situation could indicate highly motivated sellers who may accept a lower offer.
Where to Find Public Record Information
There are many places to go to find publicly available data about a property.
Public Records on File with Government Offices
Every city has a place where the public can go to search for information on a property. Property records get maintained at the county courthouse, county recorder, city hall, or another city or county department. Many public offices get staffed by knowledgeable personnel ready to help you find property deeds and encumbrances.
You can check federal court records to determine if a seller has filed for bankruptcy or if they have involved themselves in litigation.
Many counties also maintain property records online, making your search as easy as visiting the recorder’s website of deeds (or the applicable government entity) and entering your search criteria.
Real Estate Sites
You can find public data about properties in many places online. Many websites let you search for a property by area, and some even give data on unlisted homes that aren’t for sale. Here are a few sites where you can find property data:
These sites often use public records data, though you’ll want to confirm whether the information you find here is accurate.
You can research a property’s title by calling a local title company and asking for the customer service department. Many title companies will give you a free property profile. You can also ask for copies of property deeds and mortgages.
Some title companies will search for the seller’s name to determine any judgments or liens filed against the seller. These tell you that the seller has debt that may get tied to the house.
If the seller has a common name, you might turn up records that belong to someone else. Be sure to verify the identity, so you have accurate information.
Real Estate Agents
If you are working with a buyer’s agent, you can ask your agent to find even more information. In addition to helping you find public records data, most agents subscribe to proprietary services that provide property data in variable formats.
You can ask your agent to search the history of a particular property in the MLS. You can find out if the property has been withdrawn from the market and relisted or has recently sold and is now a flipper—a house that was bought, fixed up quickly, and sold for profit. Ask your agent to check whether the agent who sold the property to the seller is the same agent who now represents the seller.
Some real estate agents have access to a title company’s online database. They can download deeds and search the sales and mortgage history of a property going back decades. They might also find interspousal or quitclaim deeds from one spouse to another, indicating a possible divorce.
Many agents also subscribe to a tax record search that discloses the complete records on file at the tax assessor’s office. This information includes the home’s actual age, type of roof, and number of rooms, among other data. If the tax assessor records show different square footage than what gets noted in the listing, either the tax assessor is wrong, the seller is, or the property has improvements for which a permit did not get obtained. Buyers can check with their city planning department to determine whether a license got obtained; an unpermitted addition can affect pricing.
Some agents pay for private subscription-based online services, such as Property Radar, to access records. These sites are useful as a frame of reference for crafting a purchase offer.
In conclusion, the Chain of Title is the paper trail that establishes a person or company’s right to take proposed action concerning a piece of property. The “chain” runs from the present owner back to the property’s original owner in question.