Understanding Chain Of Title: A Basic Guide

A chain of title provides a full history of a home. For a homebuyer, it's like a history book. Each home purchase or sale is recorded, making it a crucial resource for settling ownership disputes in the future.

What Is A Title? 

A title offers legal documentation of ownership of an asset. A few types of assets that involve a title include a home, other real estate property, and vehicles. Personal property, such as jewelry, may also come with a title.

When you purchase a home, the title isn’t a physical document. Instead, a house title represents your bundle of rights as a homeowner. This bundle includes your rights of possession, control, exclusion, enjoyment and disposition.As a homeowner, you receive a deed, which defines your property and your ownership.

What Is A Chain Of Title?

A chain of title is a series of documents that can be used to back up the current owner's claim. In the context of homeownership, a deed is a physical document used to show present ownership. The chain of title refers to the sequence or history of title transfers. This must maintain an unbroken chain of ownership tracing back to the original owner.

These chain of title documents include details regarding encumbrances, foreclosures and title transfers. All documents within the chain of title should support and reinforce one another. Without a consistent history of the property, the chain of title can become confusing and challenging to navigate.

If someone ever questions your ownership of the property, the chain of title should be able to indisputably back up your right to the property.

What’s The Purpose Of A Chain Of Title In Real Estate? 

A chain of title is a document used to historically record the previous transfers of ownership for a piece of real estate. This report can help prevent future claims of ownership from multiple parties over a single real property.

A title search is a search of public records that provides insight into ownership and claims on a piece of property. This search is a step in the mortgage underwriting process, and it’s typically completed by a title company before a real estate transaction is completed.

How Do You Establish A Chain Of Title? 

When purchasing property with a title, a title company should be hired to verify the seller's valid ownership. Without a valid title, the buyer risks paying for something they cannot receive, as the true owner or title holder would retain the property.

Establishing the previous owners in a chain of title will require a thorough search of public records and legal documents related to the property. The steps of recording previous owners for a home generally include gathering all relevant documents, reviewing the deed, tracing previous ownership, checking for gaps in the ownership history, verifying all information is correct and resolving any issues that may arise during this search.

Do Liens Affect Your Chain Of Title? 

Yes, a chain of title can be affected by an owner's liens. Here’s how different types of liens can impact a chain of title: 

• Mortgage liens: A mortgage lien is very common, as many homeowners have a mortgage when they sell their home. If a property has a mortgage lien, it simply means that the seller must use the sale proceeds to pay off the remaining balance on the mortgage. This is considered a voluntary lien because you agree to these terms when you obtain a mortgage.
• Tax liens: Tax liens are considered involuntary liens. These are also common. When property taxes are unpaid, the government can place a lien on the property for the amount owed.
• Judgment liens: Another involuntary lien is a judgement lien. These can result from unpaid contractor bills or homeowners association dues.

Liens are attached to a property. If there is a lien on the home, the buyer or seller must agree to pay the liens in order for the sale to move forward.

Additional Chain Of Title FAQs

Let’s look at a quick review of some of the most commonly asked questions about a chain of title.

How do I read a chain of title? 

After the title company gathers all information for the chain of title, they will create something called a title abstract, which is a condensed history of the title. A clear title abstract guarantees the buyer won’t face any legal problems in connection with the property after buying it.

In the case of homeownership, a deed is used to show current ownership. But the documents within the chain of title should follow an unbroken chain of ownership back to the original owner. The chain of title documents will include information about any encumbrances, foreclosures and title transfers. 

Where can I get a chain of title? 

When purchasing property with a title, a title search should be completed. This is a step in the mortgage underwriting process, and it’s typically completed by a title company before a real estate transaction is finished.

What documents are used for a chain of title? 

A deed and property title are needed to complete a chain of title. A deed is a written document that transfers ownership or property interest to another person. Property title refers to a bundle of rights in a piece of property, including legal and equitable interests. The bundle of rights represents the various privileges and limitations granted to a real estate buyer as the property's owner.

Is my chain of title legitimate? 

A trusted title company will do all the title research for you. If they discover any concerns about property ownership, they'll inform you. You can choose to address the issues by paying the liens or cancel the sale.

The good news is that you can get title insurance to safeguard against any oversights by the title company. Title insurance can cover costs and legal fees if someone challenges your property ownership.

The Bottom Line 

As you can see, a chain of title is incredibly important when purchasing a new home. This report of ownership history can help prevent future claims of ownership from multiple parties over a property. If you’re ready to buy a home, start the mortgage process today!