Purchasing real estate without carrying out proper and well-detailed research is very risky practice, and could eventually result in financial losses and legal complications that could have otherwise been avoided. Some of such research whose benefits cannot be overemphasized are lien searches, 30-year searches, and O&E reports.
While these three searches are widely considered to be synonymous with a title search, it is important to note that these searches are not the same, and actually do serve different purposes.
A lien search is a thorough investigation carried out on a real estate property by an autonomous search agency that is considered satisfactory to the state records, county recorder records, local court records, and other official public records. This investigation is aimed at revealing the presence of any liens, bankruptcy, judgments, proceedings, lis pendens, or other concerns that may affect the property and the potential buyer.
Lien searches are typically free; however, you may need to pay a small fee for a copy of the report. As a buyer, you can easily carry out a lien search by visiting real estate public records websites to search for the property you are looking to get. You could also visit the county recorder, clerk, or local assessor office to search through their records for the said property. Visiting the office is a great option because it allows you to personally ask any questions that you have concerning the property’s public financial history.
If you cannot carry out the search by yourself, another option is to hire a title agency to handle the lien search for a standard fee. Hiring a title company comes with a number of benefits because they are well versed in the field. Their professionality and experience equip them with the skills required to fish out subtle discrepancies, lawsuits, and other issues that may affect the potential buyer adversely. Title agencies can also carry out surveys and encroachment investigations pertaining to the property.
A 30-year search, just as the name implies, is a title search that covers public records of a property over a period of 30 years in order to find the root of the title. These records show all open mortgages, assignments, modifications, and limitations of mortgages, valid liens and judgments, property tax information, agreements, conditions, and restrictions pertaining to the property.
Copies of all the necessary findings are included in a report called a title commitment. The title commitment is presented to both the property buyer and the seller at the end of the search. The agency also informs both parties of the steps to take so that the buyer can obtain a warranty deed at the closing of the transaction and as well as a title insurance policy that covers the transaction. A 30-year search typically costs between $125 to 500$ to perform.
An ownership and encumbrance report, also known as a property information report or current owner search is a type of title report developed only for informative purposes. It provides information on the last recorded owner of a property, a legal detailed description of the property, and valid recorded liens that may affect the property title including mortgages, judgments, etc.
This search is performed to assist in closings of equity and home improvement loans and it is especially important if the current owner acquired the property via special means, such as a foreclosure auction.
An O&E report typically contains information about:
- The current owner of the property
- Liens and judgments on the property
- Vesting deed information
- Open mortgages
- Tax information
- Legal description
- Documents of the docket provided it is a judicial foreclosure.
An O&E report differs from a title search because it is a streamlined search that focuses only on the title and encumbrances dating back to the last traditional closing on the property. O&E reports are also limited because they do not provide insurance nor do they guide the potential buyer on the right procedures to market a title acquired through a foreclosure.
However, many buyers and investors make use of O&E reports because they are cheaper than full property title searches. An O&E report usually costs between $45 to $150 to carry out.
A title binder, also known as an interim binder is a temporary form of real estate insurance that covers the process of transfer of ownership from the seller to the buyer, especially if there is an issue with the buyer or seller’s home insurance policy. It is especially useful to short-term occupants and investors who plan to flip the property immediately.
Title binders are not insurance and can not be applied to all real estate property because the standard duration for a title binder is two years.
An abstract differs from a title search because an abstract is an in-depth investigation of the property in question. It takes into consideration the history of the property, the original land grant, and even points that public records do not cover. In cases where such lands may contain minerals, such information is also provided in an abstract.
However, a title search only reviews publicly recorded documents pertaining to the ownership and possible encumbrance on the property. Due to the peculiarities associated with an abstract, it is more expensive and takes a long time to complete.
A title search is very crucial during a real estate transaction because it informs the buyer of relevant details pertaining to the previous and current ownership of the property. It also reveals any lingering liens or encumbrances that may require a quiet title action.
However, title searches come in different forms and buyers need to understand what these different searches entail before investing their money in the property. With proper knowledge and professional guidance, you have a higher chance of not making a mistake.