Abstract of Title in Real Estate

Real Estate Investing - Title Co.
Real Estate Investing - Title Co. iStockPhoto

Definition: An abstract of title is a written history of all the recorded documents and proceedings related to a specific property.

Also Known As: abstract

Examples: An attorney or a title company will research all the recorded records related to a property and prepare a written history.

Why an Abstract of Title?

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 they are and how much.  You don't want survey problems either.  You also don't want claims on the property hiding out there; an example being an ex spouse claiming ownership not shown on the title.  An abstract of title should show everything recorded at the county courthouse in relation to the property you're buying.

All liens, encumbrances, encroachments and claims should be on this report.  Only things 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.  An attorney or specialist at searching county records normally does this.  An attorney should read the abstract and comment on any problems they may see.  You don't want to sign on the dotted line until this is done.

What Kind of Stuff Could Be Found

This can be a pretty thick pile of paper, as a copy of all of the stuff found will be there to be inspected carefully.

 

  • Liens:  Mechanic and repair liens, or liens for monies borrowed against the property, second mortgage, etc.
  • Tax liens:  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.
  • HOA liens:  If you don't pay your HOA dues they can put a lien against the property.
  • HOA restrictions and covenants:  You need to know what you can and cannot do with or on your property, so these are important rules to read, as you're bound by them.
  • Surveys and notes:  If there are encroachments on your property, they will show up in surveyor notes.  An example would be the neighbor building a new fence a foot into your property line.
  • Easements:  There are often easements for utilities.  Often worded as a certain number of feet along a property line 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 their work.

As you can see, an abstract of title is an important document to understand.