An abstract of title is a written history of all the recorded documents and proceedings related to a specific property. When a sale contract is authorized, an attorney or a title company researches all of a property's records and prepares a written chronology based on what they find.
- An abstract of title summarizes all of the publicly available information about a real estate property.
- These documents are useful for homebuyers who want to ensure they understand the property they're buying.
- An abtract of title will unearth issues such as tax liens, conflicting claims of ownership, and encroachments.
What Abstract of Title Means
When purchasing real estate, you do not want to be buying a property with liens or other problems you don't know about. If you're going to buy a home with liens on it, you need to know what those liens are and how much they'll cost to remove.
You also want to avoid survey problems. You don't want any claims on the property hiding out there. An abstract of title should show everything recorded at the county courthouse in relation to the property you're buying.
For example, an abstract of title could reveal that an ex-spouse of the seller, who isn't on the title, claims ownership of the property.
All liens, encumbrances, encroachments, and claims should be on this report. Only items on record at the courthouse will be found, but normally anything not recorded is not as big of a threat, and you can buy title insurance to cover unknown title defects. A real estate attorney or another specialist normally looks up the title. An attorney should then read the abstract and comment on any problems discovered. You don't want to sign a contract until the title has been fully examined.
What an Abstract of Title Could Contain
An abstract of title can be a pretty thick pile of paper. The info on it can include tax liens, HOA information, and more.
These include mechanic and repair liens, or liens for monies borrowed against the property. For example, a second mortgage that exists on the property should be listed here.
If property taxes are in arrears, there could be tax liens on the property. They take precedence over other liens, and you can lose the property if they're not paid.
Homeowner Association (HOA) Information
If you don't pay your HOA dues, the organization can put a lien against the property. The abstract of title should also list restrictions and covenants. You need to know what you can and cannot do with or on your property.
Surveys and Notes
If there are encroachments on your property, they will show up in surveys or notes recorded with the county.
An example of an encroachment would be a neighbor building a new fence a foot into your property line.
It is common for there to be easements for utilities. Easements are often worded as a certain number of feet along a property line which is reserved for installation and repair of sewer, water lines, etc. You don't want to build a deck over this space, as the easement allows the utility to tear it up to do its work.
The Bottom Line
As you can see, an abstract of title is an important document to have prepared and to thoroughly read and understand prior to purchasing a property. While it may be tempting to skip this step in your quest for a house, it is worth doing. This step will help you avoid the risk of owing money to liens or making changes that are forbidden by your HOA. The abstract of title will also help you know ahead of time whether another claimant to the property could try to block your sale.
Frequently Asked Questions (FAQs)
What is an abstract of judgment in real estate?
An abstract of judgment summarizes the judgment of a court, such as monetary penalties in a civil case. In the context of real estate, this typically concerns property liens in a debt case.
What are abstract title fees in real estate?
It's common to include abstract title fees in closing costs. These are the costs associated with paying the title company to compile all the documents associated with the property. These fees range from a few hundred dollars for updates to more than $1,000 for creating a new abstract of title.