Charleston SC Metro Real Estate: November 2009

Understanding the Title Search

Among the many areas of due diligence in buying a home, a title search, or sometimes called a title examination, is one of the most important.  The title is a document that gives evidence of an individual's ownership of property.  The title search is usually performed by an attorney (usually the closing attorney) in an effort to ensure that the title on a particular house is free of encumbrances.  An encumbrance is any lien, liability, or charge against a property.  The attorney performing the title search will be looking for many things including:

1. Mortgages - looks for 2nd and 3rd mortgages that may affect the closing.
2. Life Estates
   
3. Right of Ways
4. Judgment liens
5. Special assessment liens
6. Current leases
7. Deed restrictions
8. Easements
9. Tax liens
10. Mechanic liens.

It is important to note that if a buyers is securing a loan from a lending institution, that lending institution will require a title search to be performed to assure the seller is conveying a good and marketable title.  Upon completion of the title search, the attorney will most likely offer the buyer Title Insurance.

What is Title Insurance?  Title insurance normally covers defects which do not appear in public records.  Title insurance indicates only that title is insurable and not that it is without defects.  If no defect is found it is considered Marketable Title, which means that it is a title that an ordinary person in an ordinary market would accept.  This is based on the concept that no title is completely free of all defects.  There are two type of title insurance policies.  Mortgagee Policies are policies that would cover the amount of the mortgage only.  Owners Policy are policies that would cover the owner's equity plus the mortgage if there were one.

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"This is not peace. It is an armistice for 20 years." – French Marshall Ferdinand Foch, Supreme Allied Commander during World War I, upon seeing the final draft of the Treaty of Versailles

"More than any other war in history, this war has been an array of the forces of evil against those of righteousness.  It had to have its leaders and it had to be won-but no matter what the sacrifice, no matter what the suffering of population, no matter what the cost, the war had to be won."  - Gen Dwight D. Eisenhower (1945 in Frankfurt).

"It is fatal to enter any war without the will to win it." - Gen Douglas MacArthur (July 1952)

HAPPY VETERANS DAY TO ALL OF MY MILITARY BROTHERS AND SISTERS AROUND THE WORLD! 

Buying real estate is a a great long term investment.  After all, as Mark Twain once put it, "Buy land, they're not making any more."  When getting involved in real estate it is important to make the distinction between the two major types of property and the rights involved in each.  The two types of property are Real Property and Personal Property. 

What is Real Estate?  Generally speaking, real estate is defined as any interest in land.  Note that interest in this case is defined as one's rights, powers, privileges, and/or immunities in real estate.  Land is best described as the surface of the earth extending downward to the center of the earth and upward to infinity, including things put there by nature such as trees and water.  This is mostly associated with real property.

What is Real Property?  Real property is the land plus things permanently attached to it either by nature or by man.  For example, the lot plus the house, fence, trees, bushes, and/or a well would be considered real property.  Real Property comes with three property rights:

1. Mineral Rights - the property owner usually owns the mineral rights below the surface since land ownership extends downward to the center of the earth.  The right to mine the property or sell the mineral rights usually comes with ownership.
2. Air Rights - Because ownership of land extends upward to infinity land rights include the air space above the land.  The government most often will supersede and restrict these rights with zoning restrictions and by allowing aircraft to use the airspace above your land.
3. Water Rights - Water rights vary by state and usually fall into one of two categories:  Riparian Rights and Littoral Rights.  Riparian Rights deal with ownership of property along bodies of water that flow (rivers and creeks) and property lines depend on local laws.  In South Carolina Riparian property rights hinge on if the stream is navigable or non-navigable.  Property owners along navigable rivers and streams property rights extend only to the water's edge.  Those along non-navigable rivers and streams could own the land under the stream to the center of the stream.  Littoral Rights deal with ownership along large lakes, seas, and oceans affected by tide currents.  Ownership here usually extends to the mean high water mark.

What is Personal Property?  All property that does not fit the definition of real property is usually classified as personal property.  Personable Property is usually movable.  Historically Personal Property has been called (and is still called this in some areas of the country) personalty or chattel property.  Types of Personal Property include:

1. Emblements - Emblements are annual growing crops (must be replaced each year).  Examples include corn, wheat, and tobacco.
2. Trade Fixtures - these are fixtures used in a trade or business by a tenant.  These include store shelves or restaurant equipment. 
   
3. Chattel Real - this is usually paperwork that displays an personal property interest in the real property.  This includes leases, mortgages, and land contracts.

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