Title Tips
Understanding the Statement of Information
The Statement of Information is a critical document used in title searches to differentiate between parties with common names. It provides personal details like birthdate, driver’s license number, and past addresses to help title companies ensure accurate searches and avoid confusion with liens or judgments against someone with a similar name.
Providing a complete and accurate SI early in escrow helps prevent delays in clearing title issues—especially for common names like John Smith or Maria Garcia. It’s a simple but essential step in ensuring a smooth closing process.
The Importance of Legal Vesting
Legal vesting describes how individuals or entities hold title to real property. Common vesting options include Joint Tenancy, Tenancy in Common, and Community Property (in states like California).
How someone holds title affects their rights during ownership and what happens when they pass away. For example, Joint Tenancy includes the right of survivorship, meaning the surviving owner automatically receives the deceased’s interest—avoiding probate. Make sure clients consult with legal or tax professionals to choose the vesting that fits their goals.
Watch for CC&Rs in a Preliminary Title Report
CC&Rs stand for Covenants, Conditions, and Restrictions—rules placed on a property by a homeowners’ association (HOA) or developer. They can affect how a property can be used, what can be built, or even the type of landscaping allowed.
When reviewing a prelim, always check the CC&Rs section for any unusual or restrictive clauses. Buyers should be aware of these early on, especially if they plan renovations or have specific use intentions for the property. It’s a crucial part of due diligence.
What is a Cloud on Title?
A “cloud” on title refers to any issue or irregularity that may affect the ownership or transferability of real property—such as an unpaid lien, a forged document, or an unreleased mortgage.
A cloud must be resolved before closing, as it can delay or even prevent a sale. Title companies identify and work to clear these issues during escrow to ensure the buyer receives clean, marketable title. It’s one of the key reasons title insurance is so valuable.
The Role of Easements in a Title Report
An easement is a legal right for someone to use a portion of another person’s property for a specific purpose—like utility access or a shared driveway.
Always check for recorded easements in the prelim, especially for access or utility rights. Easements stay with the property (they “run with the land”), meaning they affect all future owners. Buyers should be made aware of any easements and understand how they might impact property use or value.
Know the Difference Between Insured and Uninsured Deeds
An insured deed is one that has gone through a formal escrow process and is backed by title insurance. An uninsured deed—such as a quitclaim deed transferred between family members—may bypass those safeguards.
Always be cautious with uninsured deeds. They may skip critical title checks, leaving the new owner vulnerable to undiscovered liens or claims. For any property transfer, even between relatives, a title search and policy can help ensure clean ownership and peace of mind.
Understanding Property Taxes and Supplemental Tax Bills
When a property changes ownership or new construction is completed, the county reassesses the property’s value. This can result in a supplemental tax bill, which is separate from the regular annual property tax bill.
Many buyers are unaware of this additional bill and may be caught off guard when it arrives months after closing. As a best practice, always inform clients about the potential for supplemental taxes during escrow. It’s a proactive way to build trust and prevent future surprises.
The Importance of a Legal Property Description
A legal property description precisely defines the boundaries and location of a parcel of real estate, often using metes and bounds, lot and block, or government survey systems.
The address alone is not enough for legal purposes—every transaction relies on the legal description in the deed and title report. Always verify that the legal description matches what’s intended in the sale or refinance to avoid issues with boundaries or ownership later on.
Why a Preliminary Change of Ownership Report (PCOR) Matters
The PCOR is a form filed with the county assessor when property ownership changes. It provides details about the transaction—like purchase price and type of transfer—which helps determine how the property will be reassessed for tax purposes.
Filing the PCOR correctly and promptly can prevent delays in recording and help avoid unnecessary reassessment penalties. It’s also a way for buyers to potentially qualify for exclusions, such as parent-child transfers. Always double-check it’s completed accurately during escrow.
Be Aware of Subordination Agreements
A subordination agreement is a legal document that establishes one party’s claim or interest as inferior to another’s—often used when refinancing a property with multiple loans.
If a homeowner has a second mortgage or HELOC and wants to refinance the first mortgage, a subordination agreement ensures the new first loan retains its senior position. Without it, the refinance could be delayed or jeopardized. It’s a great reminder to review all liens early in the process.
Mechanic’s Liens and Their Impact on Title
A mechanic’s lien is a legal claim against a property for unpaid labor or materials provided during construction or improvements.
Mechanic’s liens can be recorded after work is completed, even if a sale has already closed. This is why title companies often require lien waivers or indemnity agreements for recent work. Educating clients on the importance of paying contractors promptly and keeping good records helps avoid unexpected claims that could delay or derail a transaction.
Understand the Role of a Notary in Real Estate Transactions
A notary public verifies the identity of the person signing a document and ensures they are signing willingly and knowingly. In real estate, notarization is required for deeds and other key documents to be recorded with the county.
Valid identification is a must at signing appointments, and that notarization helps protect against fraud. Mobile notaries offer flexibility and can meet clients wherever they are, helping to keep transactions on track.
Know the Difference Between an ALTA Policy and a CLTA Policy
ALTA (American Land Title Association) and CLTA (California Land Title Association) policies both provide title insurance coverage, but ALTA policies offer broader protection, especially for lenders. ALTA policies are commonly used in lender transactions and include coverage for off-record risks.
It’s important to understand which policy is being issued and why. While buyers typically receive a CLTA Owner’s Policy, lenders often require an ALTA Lender’s Policy. Knowing the distinctions helps agents and clients better navigate risk and coverage in a transaction.
The Importance of Reviewing the “Exceptions” Section in a Title Policy
The title insurance policy includes a list of exceptions—items not covered by the policy, such as easements, CC&Rs, or unpaid property taxes.
The title policy doesn’t insure against everything. The “Schedule B” section lists specific exceptions they should understand before closing. Reviewing this list helps avoid surprises and ensures buyers know what limitations come with the property. It’s an essential part of due diligence.
Understanding “Owner’s Affidavits” in Escrow
An Owner’s Affidavit is a document signed during escrow in which the seller confirms facts about the property—such as no outstanding work done recently, no undisclosed leases, or other claims.
This affidavit helps the title company assess potential risks and uncover issues not visible in public records. It’s especially important for confirming no recent improvements that might lead to mechanic’s liens. A well-informed agent can explain its purpose and help ensure smooth closings.
Power of Attorney (POA) Use in Real Estate Transactions
A Power of Attorney allows someone to act on behalf of another, including signing real estate documents. However, its use must be approved by the title company and the document must be properly executed and recorded.
Not all POAs are acceptable for real estate transactions. Title companies will require a review to ensure it grants specific authority to buy, sell, or encumber real property. Always submit the POA early in escrow for approval to avoid delays at closing.
Why the Vesting on the Deed Must Match the Buyer’s Intent
Vesting determines how a buyer holds title to the property—whether individually, jointly, in trust, or through an entity. Errors in vesting can lead to future legal complications or probate issues.
Always verify the buyer’s intended vesting with them and, if needed, suggest they consult legal or tax professionals. Ensuring the correct vesting before recording avoids the need for costly and time-consuming corrective deeds later on.
Why Property Profiles Are Powerful Tools
A property profile provides a snapshot of key details about a property—such as ownership history, assessed value, parcel number, legal description, and recorded documents like deeds or liens.
Use property profiles as a proactive tool when prospecting or preparing for a listing appointment. They offer valuable insights for both agents and clients, help identify potential title issues early, and demonstrate your professionalism and preparedness.
Understand the Difference Between a Grant Deed and a Quitclaim Deed
A Grant Deed conveys ownership and includes guarantees that the seller has not transferred the property to anyone else and that the property is free from undisclosed encumbrances. A Quitclaim Deed, on the other hand, transfers whatever interest the grantor has—with no warranties.
Always clarify with clients which type of deed is being used. While quitclaim deeds are common in transfers between family members or in divorces, they offer no protection if title issues arise later. Grant deeds are more standard in sales because of the built-in assurances.
Be Mindful of Trust Vesting in Real Estate Transactions
When a property is vested in the name of a trust, additional documentation is usually required during a sale or refinance—such as a Certification of Trust or the trust agreement itself.
Always verify if the property is held in a trust early in the process. Title companies will need to confirm the trustee’s authority to act on behalf of the trust. This can prevent closing delays and ensure a smooth transaction, especially when dealing with estate planning-related sales.
Be Aware of the Preliminary Title Report’s Effective Date
The effective date on a prelim indicates when the title company last pulled public records to check for liens, encumbrances, or ownership changes. Anything recorded after this date won’t appear on the report.
Make sure to order an updated prelim if significant time passes before closing or if there’s any concern about new activity (like a recorded lien or transfer). This ensures no surprises and maintains clear title at the time of transfer.
Understanding “Subject-To” Transactions
A “subject-to” transaction occurs when a buyer takes title to a property subject to the existing mortgage—meaning the loan remains in the seller’s name, but the buyer takes over payments.
These deals can be complex and carry risk. Title companies may limit their involvement or require specific documentation. Educate clients that while “subject-to” deals can be creative solutions, they should always involve legal and title review to avoid future complications or disputes.
Understand What a “Chain of Title” Is
The chain of title is the complete history of ownership transfers for a property, documented through recorded deeds. A clear chain shows unbroken ownership from the current owner back to the original.
Title companies examine the chain of title to ensure there are no gaps, errors, or fraudulent transfers. If the chain is broken, it can cloud the title and delay closing. Reviewing and resolving these issues is a key reason title insurance is essential in every transaction.
Know When a Property Is in Probate
If a property owner passes away without a trust or joint tenancy, the property may go through probate—a court-supervised process to distribute the estate.
Transactions involving probate require court approval and may involve delays. Title companies will need court documents, such as Letters of Administration or a court order to sell. Always ask early in the transaction if the seller inherited the property recently to avoid surprises and keep timelines realistic.