A title search is the next big step in the fix-and-flip process, ensuring you, are buying a property free of, any legal issues. It could affect the resale value or even bring unexpected costs. If you want to perform a title search for fix-and-flip properties, here is a simple guide.
Steps for title search in a fix-and-flip property
Understand the purpose of a title search
A land title search is conducted to verify the legal ownership of a property and check for any liens, claims, or encumbrances against it. For fix-and-flip investors, it is necessary to ensure that the property title is clear. It means it is not burdened, by mortgages, legal issues, or unpaid taxes. An unclear title leads, to delays, legal disputes, and extra costs when, you try selling the property.
Engage a title agent or title company
Sure, you can do some part of the title search independently; it is, best to work with a professional title agent or company. For fix-and-flip investors, working with agencies is a better option, as they have access to many resources and databases, allowing for accurate and efficient searches. They also provide title insurance policies, protecting the investor financially against any unforeseen claims on the property.
Search all the public resources
To understand the property’s title status, investigating, several public record types is necessary. You can access them via a county recorder’s office, online databases, or courthouses.
Here is what to focus on:
Tax records: Unpaid property taxes become liens against the property, transferring to the new owner. So, checking with the local office, and being up-to-date about it is necessary.
Deed records: It shows the ownership history, revealing if there are any irregularities in property transfer. You should verify whether or not the seller has a clear claim for the property.
Mortgage records: If there is a mortgage, outstanding, pay it off before you transfer the title. It is important, with distressed properties where owners have defaulted on the loans.
Always examine the chain of title
The chain of title is the transfer of ownership of the property. Conducting, this even going back as far as possible to establish an uninterrupted and clear record. For fix-and-flip properties, older ones, or distressed situations, you should trace ownership to reveal discrepancies or any breaks in the chain, specifically when the transfer wasn’t properly recorded. If you work with a title search agency or company, they will review 40-60 years of the property’s history, ensuring clarity.
Check for liens and encumbrances
Liens are a critical aspect of title search, especially if the property is distressed and known for unpaid debts. The common liens you may encounter are mortgage liens, where you have satisfied a previous mortgage on the property before transferring ownership, of the property. If the previous owner did not pay property taxes, a lien must be placed on the home, and it has, to be paid off before you can sell it. A mechanic’s lien is placed by workers or contractors who did not get paid for their services. It is relevant in properties with past renovations. Judgement liens are court-ordered liens resulting from a lawsuit attached to the property.
Go with title insurance
You must get title insurance when buying a fix-and-flip property, as it protects your investment against unforeseen claims happening in the future. After completing a title search, you can work with a title company providing insurance covering financial losses if you find any hidden defects later on, like recording errors, fraud, or more. This offers peace of mind and security.
Ensure proper transfer of title transfer at closing
While closing, please ensure, all the documents are signed properly, and the liens are settled before you finalise the purchase. A title company ensures that the ownership rights and deeds are accurately transferred to you.
Conclusion
Conducting a title search is a mandatory step, in the fix-and-flip process, mitigating legal risks and ensuring smoother transactions. You, need to examine public records, verify liens, and secure title insurance, protecting your investment from unforeseen disputes and costs. This allows you to stay focused on the renovation process while maximising the resale value, of the property.
Morgan Reid, with an MBA and a decade in business strategy, specializes in boosting company performance and operational efficiency. Known for practical insights, Morgan contributes to publications and speaks at industry events, blending expertise with a passion for tech and business innovation.
