ABA Family Legal Guide

Buying and Selling a Home

Introduction to Buying and Selling a Home

What does title mean?

Title to real estate consists of ownership of and the right to use the property. That is, if you are the legal owner of record, you have title to the property and are the title owner. However, title exceptions, or clouds on title, which are possible claims of others to your title, may affect the interest of a title owner.

There are several kinds of title exceptions. For example, different people may have claims or liens against the real estate. A lien is a claim against the property that often represents an unpaid debt of the owner or unpaid judgment entered against the owner by a court of law. The most common form of lien against real property is a mortgage or deed of trust. If the titleholder does not pay the lien or claim, the creditor may ultimately have the right to sell the property to satisfy the debt.

Other types of title exceptions include mineral rights, mechanic's liens, unpaid taxes, private and public utility easements, and road rights-of-way. Covenants of record or restrictions of record, which generally take the form of a written document that sets forth restrictions on the use of the property, are another important kind of title exception. For example, if a home has been built in conjunction with other homes, there may be a subdivision or common-ownership association declaration recorded that addresses architectural controls, limitations on renting the property, and restrictions on business activities at the property. Covenants written long ago may contain restrictions that are unenforceable today, such as prohibitions against selling your home to a member of certain racial, religious, or ethnic groups. You can ignore these, but you should understand covenants that are enforceable.

There may be questions about whether the seller can convey good title. A search of the public records is always done prior to the closing. A title search reveals who owns--and what title exceptions affect--the property, as a result of those parties recording a document evidencing their claim in the public record. A lawyer, an abstract company, or a title insurance company can conduct such a search. The results of this search are usually compiled in either an abstract of title or a title insurance commitment to help the buyer determine who owns the property and if there are any title exceptions that would interfere with the buyer's use of the property. There may, however, be other claims of an interest in the property not shown on the public record.

Any unacceptable title exceptions should be corrected before the closing if possible. Typically, the seller is responsible for remedying title defects.

In addition to title exceptions, government regulations, such as zoning or occupancy laws, also affect the use of real estate. The buyer should ask a lawyer to explain these restrictions before closing.

Even in areas of the country where the buyer receives a title insurance policy, buyers and sellers should seek the advice of a lawyer to gain an understanding of what affects title.