Chicago Real Estate: Good Clean Unclouded Marketable Title
So you want to sell or buy some real estate, but your attorney keeps talking about “exceptions to title,” “clouds on title,” “bricks on title,” “clean title,” and everything in between. What is he or she talking about, and why is it stopping you from buying or selling a property?
Title History and Title Reports
Every property has what is known as a “title history” contained in the public records of the county where the property is located. Think of this as CARFAX for real estate. Property records in some counties date back to colonial times and are full of deeds and other documents going back to the original owners.
The title history is important because within it lies every booby trap, pitfall and tripwire that might make your purchase of the real estate a bad investment. For example, a house is usually purchased with some cash from the buyer and a mortgage loan. At closing, the bank provides the loan funds and records its mortgage on the property’s title. After the mortgage is recorded with the county recorder, it will show up in the title history of that particular property to let everyone know that Goliath National Bank has a mortgage outstanding on the property.
Why is this important? Because when you go to buy a house, your attorney will receive from a Title Insurance Company (whose business it is not only to sell title insurance, but also to be the primary source of usable information about title histories) a Title Report. The Title Report will show all of the active “exceptions to title” in the title history. An exception to title is something recorded on the title of the property which serves as public notice that another party has an interest in the real estate other than the owner. For instance, the above-described mortgage provides Goliath National Bank with a priority in the real estate greater than anyone else. A new buyer would not be able to come in and buy the property from the owner without first making sure Goliath National Bank’s mortgage is paid off.
So when your attorney starts talking about “exceptions to title” he/she really means to say that there are other parties with interests in the property that have to be dealt with before you can get “marketable title” or “good title” or “clean title” (there are many synonyms in Real Estate Law) to the property.
Clean Living (and Title)
The good news is really two-fold: First, in about 99% of real estate deals, all of the exceptions to title are cleared up at closing so owners do not need to worry about them; and Second, unless your lawyer commits malpractice or there is some special circumstance, the Title Insurance Company (biggest one, Chicago Title and Trust) will insure your title, which means that if some exception to title comes out of the woodwork to upstage your claim to the property, you can get some or all of your money back.
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