What Is an Abstract of Title?
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Why Is an Abstract of Title Important?
An abstract of title is important because it can determine the legal owner of record (the person or entity publicly listed as the owner of an asset, such as real estate). It can also identify issues in the title that need to be resolved so it can be transferred from the seller (grantor) to the buyer (grantee).
An abstract of title is a list of documents from the county recorder’s office that tells the story of a property’s title history. This history includes the names of all previous owners, when each owner transferred the property to the next owner, and other historical information related to the property.
When a property is being bought and sold from one owner to another, an abstract of title (also referred to as a title search) is performed on the property to verify that there is a clear chain of historical ownership with no liens or encumbrances that would cloud the title.
If an abstract of title reveals outstanding issues that need to be addressed, these problems can be dealt with before the seller is paid and/or before the lender advances their loan proceeds to the property owner.
An abstract of title is also useful when a lender is taking the property as collateral for a loan. In these cases, the mortgage lender wants to ensure that the property does not have any other title issues that would encumber their security interest in the property.
Abstract of Title vs. Chain of Title vs. Title Search
The terms “title search,” “chain of title,” and “abstract of title” are often used interchangeably. All three refer to something similar—in this case, the history of a particular property—but there are differences in the breadth and depth of information pulled from county records.
Abstract of Title
The abstract of title is the historical records of a property’s transfer history to reveal all relevant documents that pertain to the current transaction. The person in charge of obtaining these documents is known as a “title abstractor.”
Depending on the requirements of the closing agent and title insurance underwriter, an abstract may look back 30 to 40 years in time. In some cases, it may look back much further in time to reveal the property’s entire title history. Some properties have a history that goes back hundreds of years, depending on their age.
A title search essentially refers to the extracting of relevant title documents from the county’s records of a property—in other words, the process of obtaining an abstract of title.
Depending on the requirements of the lender, closing agent, and buyer, a standard title search may look back in time at all recorded documents for a property as far as 30 or 40 years. This is usually far enough to identify any outstanding issues relevant to the transaction.
Chain of Title
Meanwhile, the term “chain of title” can be thought of as a noun. Once the title abstractor has pulled their abstract of title from the county records, they can analyze the documents and look at the historical transfers from one owner to the next, which is known as the chain of title.
What Does an Abstract of Title Contain?
Here are some of the information that may be included in an abstract of title:
- Previous owners. The names of each entity or person who has owned the property, along with the date they purchased and the date they sold the property.
- Price. Depending on the state’s disclosure laws, the title documents may show the amount each buyer has paid for the property, including mortgages, taxes, and other fees involved every time it was sold.
- Unpaid property taxes (if any). If the previous property owner failed to pay taxes, then the property will likely have a tax lien or tax forfeiture of record. In the vast majority of cases, a property will not be transferred until the property taxes are paid current.
- Easements. An easement allows a person or entity to use the property owned by another person or entity for a specific and limited purpose.
- Encroachments. An encroachment happens when a property owner builds or extends a structure onto their neighbor’s property without the latter’s permission. Any encroachment on a property, like the construction of a fence or garage over property boundaries, appears in the surveyor’s notes and is included in the abstract of title.
- Liens. A lien is a claim against property made by someone to secure payment of a debt. Repair liens, mechanic’s liens, second mortgages, and liens for borrowed money are listed in the abstract of title.
- Homeowners’ association (HOA) liens. If a property owner does not pay HOA fees, the association can impose a lien against the property. This lien will be listed in the abstract of title.
- HOA restrictions. HOA rules and regulations may also dictate what a buyer can and cannot do with a property. These restrictions will also show up on the abstract of title.
- Legal judgments. Any wills, grants, lawsuits, and other relevant records associated with the property.
BY THE NUMBERS: Abstract of title fees vary from $200 to $1,000, depending on the area and the complexity of the title search.
Source: Rocket Mortgage
What Does a Title Abstractor Do?
A title abstractor is the professional responsible for preparing an abstract of title. They search records and public documents to verify the title of a property and determine its history.
Some of the roles and responsibilities of abstractors include:
- Title search. The abstractor goes through public real estate documents like county property records, deeds, wills, and other relevant sources to find information about the property’s history.
- Transaction review and verification. The abstractor checks if the property owners have properly signed off on transfers of ownership and whether they were done legally.
- Claims search. The abstractor checks if there are claims and liens against the property, including trust deeds, mortgages, unpaid taxes, and dues.
- Zoning check. The abstractor verifies zoning and building ordinances that may affect the use and sale of the property.
- Dispute resolution. A court may appoint an abstractor to explain information on liens, deeds, and titles to clarify property transfer issues. The abstractor also summarizes information and compiles it into a report usable by buyers, sellers, real estate agents, lenders, credit bureaus, and appraisers.
- Cooperate with surveyors and tax assessors. The abstractor works with these professionals to make sure a specific property is described correctly on all legal documents.
- Historical research. Title companies hire abstractors to research the history of a piece of property beyond its chain of title.
To become an experienced abstractor, one must obtain the necessary licensing and tools to do business. Some real estate attorneys and licensed realtors also act as abstractors.
BY THE NUMBERS: The average national salary of a title abstractor in the U.S. is $48,253 per year.
Many professional title abstractors can access country records through various property data services like DataTree.
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If you are a DataTree subscriber, you can get access to much of the same information in many counties throughout the United States.
- An abstract of title is a list of documents detailing a property’s title history such as legal transfers, mortgages, and liens of record.
- An abstract of title helps the closing agent verify that there are no other claims and limitations to the use of the property that they are eyeing. It is also used to verify that there are no clouds on title.
- An abstractor is a professional, usually employed by the municipality, county, or title company, who prepares an abstract of title.
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- CourhouseDirect.com. (2019.) How to become an abstractor. Retrieved from https://info.courthousedirect.com/blog/how-to-become-an-abstractor
- Araj, V. (2022.) What Does A Title Company Do? Rocket Mortgage. Retrieved from https://www.rocketmortgage.com/learn/what-does-a-title-company-do
- Applegate, M. (n.d.) What Does a Land Abstractor Do? Chron. Retrieved from https://work.chron.com/land-abstractor-do-28179.html