Why does a title report matter in a house sale?

Arizona residents who are buying homes should understand what a title report shows and what title insurance can and cannot protect against.

Buying a home can be a very exciting experience for Arizona residents. Whether a first-time home purchase or a subsequent one, the process can be filled with anticipation about living in a new house. However, buyers should not underestimate the importance of the escrow process in uncovering potential problems before their sale closes. The title report is an integral part of this.

Legal right to sell

First and foremost, a title report can ensure that the person selling the home actually has the legal right to do so. The Washington Post insists that buyers must be sure of this fact before proceeding with their purchase.

Encumbrances on a title report

In addition, a title report will show any encumbrances on the property. The American Bar Association explains than an encumbrance is anything that indicates another entity or person may have some right associated with the property. Examples of encumbrances include judgments, liens and bankruptcies.

Buyers need to know if other entities have some claim to a portion of the home's value. In some cases, liens may have already been satisfied but not removed. During escrow, this can be discovered and effort on removing satisfied liens or judgments can take place.

Zillow adds that not all encumbrances indicate the presence of problems as mortgage liens will also display on title reports. If a seller has a second mortgage, the two mortgages should appear in order of priority for repayment.

Other details included in a title report

While a title report can show financial responsibilities, it can also provide insight into other factors that a buyer should know about. For example, any easement or right of way on a property should be detailed on a title report. So too would the identification of a property on a historical registry. Details of covenants, conditions and restrictions would also be provided on a title report if they are applicable to the property in question.

The importance of title insurance

Title insurance can protect a buyer against problems that arose up to the date that the policy was purchased but that were discovered after that date. It is a way for a buyer to get added security that the title report is accurate and complete.

However, a title insurance policy can only protect against things that were actually matters of public record. Therefore, title insurance will not cover a tax assessment, mechanic's lien or public easement that failed to be recorded.

A home purchase is a legal process

Home buyers in Arizona should remember that the process of buying a home is a legal one. It is therefore always recommended that they work with an attorney when they have questions about any of the documentation involved in buying a new home. This is the best way to stay protected against future problems that can be very costly.