Check out this short video for an explanation.

A title search amounts to combing through the public records for documents affecting ownership of and obligations pertaining to a tract of real estate. The search is performed by the title insurance agent, who then issues a title insurance commitment or other type of report, depending on the instructions of the customer. If a title insurance commitment is issued and the transaction closes, a title insurance policy is issued after the closing.

Title searches are the core work of any title company. Why?

Because each state has its own system of keeping track of records of property ownership so there can be an orderly way of knowing who owns what, who has rights to do certain things on specific property, and who can claim an interest in property – for example, based on using the property as collateral for a loan.

“Real property” vs. “Personal property”

The idea is that if property records are kept in a central office, it ought to be easier to figure things out. And it is…in a way. But while in Indiana the county Recorder’s office is the place where most property records are kept, other government offices are involved too, including county, municipality, state, and federal. So-called “real property” records aren’t set up like Indiana’s Bureau of Motor Vehicles, which acts as a clearing house for all vehicle transactions. If you sell your car (a specific type of “personal property”), you sign the certificate of title over to the buyer and the BMV issues a new certificate of title in the buyer’s name. Loans on cars show up on certificates of title, too. So the BMV is a one-stop-shop for proving and transferring ownership for all vehicle transactions.

Not so with real property, which has no central clearing house to document ownership and property rights and claims. Instead, a host of government offices may be involved. Which is why records in all those offices must be checked to figure out what’s really going on.

Which offices & records?

To determine ownership rights and claims of real property, we search records in the offices of the Auditor, Assessor, Treasurer, Recorder, and Clerk of the courts in the county where the property is located. In many cases, though, official records outside the county may be relevant, including proceedings in U.S. Bankruptcy Courts and U.S. District Courts. Depending on the transaction and the title product requested by the customer, searches may extend to planning and zoning offices.

Usually, we request an owner’s policy from the current owner to start our search. Otherwise, we may have to search backwards for at least 50 years to verify the chain of ownership and other matters affecting the property. Some searches are performed in government offices where we pour through books, microfilm, and computer indices (these searches are called “finger searches”) while others are done on our title plant (our database which replicates records in the county Recorder’s office for a certain number of years). Records found in these offices provide a snapshot of a property at a point in time.

Contrary to what some think, unlike the BMV, government offices don’t provide proof of ownership, liens, or other matters. Instead, it is up to the title company to examine all the records compiled over the years – a process called “examination” – to determine who owns the property and who has a valid claim, easement, lease, mortgage (or other lien), or conflicting interest in the property.

Only after all that may title to the property be insured.

Human beings aren’t the only persons who own, sell, buy, and mortgage real estate. So do firms and businesses. Add trusts, not-for-profits, and loosely formed associations. Because there are so many types of organizations, they’re often referred to as entities.

To legally exist, most entities must be formed according to state law. In many cases (in Indiana, at least), that means filing organizational documents with the secretary of state. Some would-be entities get forms online at the secretary of state’s website. Others hire lawyers to handle the particulars.

Among the types of entities that have to file with the secretary of state’s office are corporations (both for profit and not-for-profit), limited liability companies, and limited liability partnerships.

Entities that don’t have to file with the secretary of state to exist legally are partnerships, unincorporated associations, and so-called grantor or living trusts.

But, when it comes to entity owned real estate, keep in mind that the entity itself is the owner, as opposed to the people who make up the entity. Human beings who are entity-owners (members, shareholders, managers) often forget this, thinking the entity they created is a mere formality. It isn’t. It’s the owner. So, for the entity to act officially, it must play by the rules it made for itself which are part of its entity documents.

That means if an entity is borrowing or selling, buying, or mortgaging real estate, title companies will ask for documents they don’t otherwise ask human beings for. For example, if Jim Jones is selling his house, the title company will be satisfied that Jim can sign the deed over to the buyer if Jim proves he’s Jim by showing a valid, government-issued photo ID. Jim won’t have to prove he exists (we can see and talk to him, after all). All he’ll have to do is link his physical person as the signer of the new deed to the name on the deed by which he took title to the house.

Not so with an entity. Unlike Jim, amorphous entities don’t have a physical existence. The entities’ owners do, but not the entities themselves. So, title companies need to verify the entities actually exist and can do what the entity is trying to do.

That means title companies ask for proof. For entities formed by filing papers with the secretary of state, title companies will want copies of those filed papers with the secretary of state’s seals and filing dates clearly visible. Because entities which filed must renew their filings periodically or automatically cease to exist, title companies will need proof of that too.

But there’s more. Because entities can’t do more than their official papers allow them to do, entities must prove they have the right to do what they plan to do (sell, buy, borrow, mortgage). And because entities can’t sign papers themselves – people involved with the entities must do that for them – title companies must have proof who the authorized signers are.

So, when a title company asks for copies of various documents and for an official entity resolution that authorizes the transaction and who can sign the documents, please don’t be offended or put up a fight. The title company isn’t trying to meddle in the entity’s affairs, only to verify that the transaction can proceed as planned.

Trusts are a little different, although the concept is the same. Most of the trusts title companies run into are formed by individuals and are revocable – can be cancelled at any time.

These trusts spring to life with a trust agreement which doesn’t have to be filed anywhere (secretary of state, county recorder, or anywhere else) and are usually designed to avoid probate.

Although I’m painting with a broad brush here, when a person who owns real estate dies, it may be necessary to go to court to determine who inherits the property. Trusts avoid this issue because the person (grantor) who forms the trust designates a beneficiary who becomes the owner automatically at the grantor’s death.

Because these trusts are a lot like wills and are not filed publicly, what many owners (grantors) forget, is that once the real estate has been put into the trust, they no longer own the property. Instead, the trust owns it (actually, according to Indiana Code 30-4-1-1, the trustee owns it). And, of course, what the trustee can and can’t do with the property (sell, buy, borrow, mortgage) depends on what the trust says. Which is why title companies have to see the trust document itself OR a Certification of Trust (see I.C. 30-4-4-5) which summarizes the important details.

Sometimes, when a Certification of Trust isn’t available and title companies ask for copies of the trust, the trustee (who usually is the grantor) resists, thinking the trust provisions – who gets what when the grantor dies – are private and confidential. But, as with other types of entities, title companies need to know that the transaction is permissible and who is authorized to sign. Title companies don’t care who gets what at death, only that the i’s have been dotted and the t’s crossed so the transaction they are handling will be valid. And, unlike when a Certification of Trust IS available, keep in mind that title companies need the whole trust, not just snippets here and there that the trustee thinks are pertinent. Because some clauses can override others, title companies need to see the whole shebang.

As for unincorporated associations – like some small churches – their existence may not be blessed by the secretary of state (although can be if the association files as a non-profit). But they still must have an organizational structure with rules about who governs, what types of actions the group can take, how decisions are made, and who can sign. So, title companies will ask for the same kind of paperwork, minus the official part from the secretary of state.

• Personal checks are accepted for amounts under $500.00.

• Cashier’s checks from local financial institutions are accepted for amounts from $500.00- $9,999.99.

• Any amount $10,000.00 and over must be sent via wire transfer.

It’s a request we get month in, month out. And there are good reasons for it…sometimes. But month-end closings can present problems. So, like most choices in life, balance is critical: the upside has to outweigh the down.

First things first. Why are month-end closings so popular?

For buyers getting new mortgages, the nearer to the end of the month a settlement takes place means less interest paid up front. For example, if closing occurs on March 30, the borrower’s first mortgage payment won’t be until May 1 (which includes interest for April).

Consequently, at closing the borrower will have to prepay interest for only two days (March 30 & 31). That’s a good thing. But suppose closing occurs on April 2. The borrower will have to prepay interest for 29 days (April 2-30). Whoa! That’s a lot more than a measly two days. But consider this: the first mortgage payment won’t be until June 1. So, which is better? Coughing up 29 days interest in advance and putting off your first payment for almost a month more or paying less at closing but starting your mortgage payments a month earlier?

For borrowers squeezed for cash, closing late in the month makes sense. But if cash at closing is not an issue, why jockey for a closing date when title companies and lenders are busiest? It’s no secret that the end of the month is when title companies’ closing schedules get hectic. Which means closings are stacked up hour after hour. In turn, efficiency suffers and the chances of mistakes go up. In fact, if problems do occur, the closing may have to be delayed until the following month. Meaning more up-front money. Not a good thing for borrowers who can’t afford it.

These days, end-of-month (and Friday) closings have another issue to deal with: wire transfers. In Indiana, all funds of $10,000 or more (per person, per lender, etc.) must be sent to the title company by electronic transfer. Often, lenders don’t send funds until all closing requirements are met – in other words, at the closing table. Given that many banks cut off sending wires at 2:00 p.m., afternoon closings probably won’t be funded until the next business day. Sometimes, the next business day is the following Monday – or Tuesday if Monday’s a holiday. And it all goes downhill from there, because if sellers haven’t received their money (and they won’t until funding occurs), most sellers won’t let buyers move in. So, if the buyer has a moving van waiting to unload, the movers will have to cool their heels until funding. Definitely not a good thing.

What do month-end closings mean for sellers? As just mentioned, there’s the downside of waiting for their funds, which can create a domino effect. If the seller intends to use the money from the sale to buy another home later that day, the seller’s purchase will have to be delayed.

You don’t even want to think about the consequences if it’s the seller’s last day to close or the seller’s (soon to be buyer’s) new mortgage rate-lock expires. Late funding also means the seller’s outgoing mortgage won’t be paid off as early because the title company can’t wire the payoff until the sale has officially closed, adding extra days of interest and possibly late fees.

Worse, if the seller has an FHA mortgage, the cash outlay racks up even faster because FHA charges interest for the whole month regardless of when payment is made. So if the closing is pushed back from the end of March until the first of April, the seller will have to pay all April’s interest (even if closing is on April 1 st). Most sellers won’t be pleased. Some April Fool!

The word to the wise is to plan ahead – and conservatively. Shoot for early or mid-month. Don’t take a chance on saving money and getting the deal closed. And remember, not only will title companies be pulling their hair out end of month, so will lenders. Just as title companies can close only so many sales within a certain period of time (only so many hours in the day), same goes for lenders who can process only so many loans. Because most lenders will be pulling out all the stops, mistakes can be made which may cause delays.

So get your deal closed early and rest easy while the ones who didn’t plan ahead break into a sweat.

If you’re new to real estate ownership or an experienced hand who wants to brush up, it’s a good idea to go over what “title” means and how buyers should hold it when they buy a house.

If you’re a lender or real estate agent, you’ve probably heard all this before. Still, it never hurts to confirm what you already know or be reminded of what might have inched to the back of your brain.

First, a little clarification. I’ve referred to holding “title” in connection with buying a house. The same rules apply to buying commercial property, although non-residential property often is acquired in the name of a firm (i.e., partnership, corporation, limited liability company). That’s a separate topic we’ll save for later.

For now, let’s think residential. Title companies who prepare deeds and insure ownership always ask how buyers want to take title. But that’s actually the second issue. The first is what sort of title are the buyers getting. Do I mean there’s more than one kind of title? Yes, although in residential transactions, owning less than what might be called full ownership is rare.

Let’s look a little deeper.

In real estate, “title” to property means ownership of a specified interest in that property. The ownership interest can take several forms, including “fee simple” (full or outright ownership), “life estate” (ownership limited to the length of someone’s life), and “leasehold” (long-term tenant’s rights under a lease for a specified period, often 30 or more years). It’s unusual for buyers of houses to acquire less than full or outright ownership or to share ownership with somebody else. That’s because most buyers want total control and because their lenders require it. How many lenders would be willing to lend money to buy a house if the buyer’s ownership ends when the buyer’s 80-year-old grandmother dies? Or when the buyer dies?

But, assuming buyers are acquiring full ownership (as mentioned above, the legal term is “fee simple”), do lenders care how title is held? Probably not, so long as the buyers are creditworthy and qualify for the loan. If one of a pair of buyers has credit problems, though, lenders may require that only the qualified buyer hold title. This is because regulators (or upstream purchasers of loans in the secondary market) don’t want a person with bad credit on the loan. There are reasons for this too, having to do with loans being packaged and sold in the form of mortgage-backed securities (MBS). Unless you’ve been hiding under a rock during the recent economic meltdown, you’ve undoubtedly heard of MBS. In any event, who holds title may be credit-driven instead of buyer’s preference.

Does who holds title (whose names are on the deed) really matter? Read on and decide for yourself.

As mentioned above, an owner holds “title” to whatever interest in the real estate is being acquired. Usually, that interest is “fee simple”. Full or “fee simple” ownership can take several forms if the real estate is co-owned (tenancy in common, joint tenancy with the right of survivorship, tenancy by the entireties), each form having different attributes and consequences.

Ownership as “tenants by the entirety” is reserved for married couples, so let’s save that for last.

First then, “tenants in common” and “joint tenants with right of survivorship”. Simply put, if two people own as tenants in common and one of them dies, the surviving co-owner does not inherit the decedent’s share. Instead, that share goes to the decedent’s heirs (among whom could be the co-owner but not necessarily). In contrast, if two people own as joint tenants with right of survivorship, on the death of one co-owner (sometimes co-owners are called “co-tenants”) the surviving co-owner becomes the owner of the decedent’s share. Casual friends who are co-owners may opt to own as tenants in common because each prefers for his or her share to end up in the hands of his or her heirs. On the other hand, co-owners who have more than a casual relationship (family members, domestic partners) may prefer the survivor to take it all. As mentioned above, typically lenders don’t express a preference how title is held unless the creditworthiness of one of the co-owners rears its head.

Now, “tenants by the entirety”. Unlike the other two forms of co-ownership, tenants by the entirety must be spouses. As with joint tenants, the surviving spouse inherits from the deceased spouse automatically. However, tenancies by the entirety provide other protections of marital property from the folly or misfortune of either spouse. For example, except for the lien of taxes filed by the IRS, in Indiana the debts of one spouse will not become a lien against property owned as spouses. This is because in Indiana a magic shield ring-fences spousal property. Conversely, neither tenants in common nor joint tenants enjoy similar protections. Most deeds conveying real estate to spouses refer to them as a married couple instead of tenants by the entirety. But both terms mean the same thing.

What about same-sex marriage? Although Indiana has a statute (I.C. 31-11-1-1) prohibiting same-sex marriages, the U.S. Supreme Court’s decision in Obergefell v. Hodges on June 26, 2015, held that no state may prohibit same-sex couples from marriage on the same terms as couples of the opposite sex, and also held that all states are required to recognize same-sex marriages validly performed in another state.

So, boiling all this down, here’s where we end up. In a typical house sale, “title” is transferred by the seller to the buyer when the seller signs the deed and the deed is given (“delivered”) to the buyer. Deeds are then filed in the county Recorder’s office. In turn, the “title” is insured by a title insurance policy. The official owner is the person whose name is on the deed.

Let’s close with a practice tip. Say two people (married or not) want to co-own a house but one of them doesn’t qualify for the loan because of credit problems. Is there still a way for them to co-own? Yes. At the closing, the creditworthy person can take title alone and sign all the loan papers. Then, after closing, the creditworthy buyer can sign a deed to the two of them (which designates how title is to be held: tenants in common, joint tenants with right of survivorship, or tenants by the entireties) then record it. Most lenders don’t have a problem with this, but before doing it be sure to check.

And don’t forget to tell the title insurance company so it can change the name of its insured to the creditworthy buyer and his or her co-owner.

American Land Title Association says it best here

Watch this short video on Zix email to understand what encrypted means.

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