Iowa Real Estate: Title Opinions
When a buyer is purchasing real estate, the buyer’s attorney will complete a title opinion. A title opinion is an attorney’s professional opinion regarding the title for a parcel of real estate. The attorney will examine the abstract for the property, which contains the history of that parcel from the beginning of statehood, to ensure there is clear title.
What exactly does the title opinion reveal?
1. Whether the seller owns the property.
The title opinion reveals whether the buyer is buying the property from the owner. The attorney will examine the abstract to ensure title passed from person A to person B to person C, who is the seller. The buyer, of course, cannot buy the property from someone other than person C. It is not unusual for complications to arise regarding who holds title to the property especially when contracts, leases, estates, or divorces are involved.
2. Whether the property is encumbered.
The title opinion reveals whether the property is encumbered with any mortgages, liens, judgments, outstanding taxes, leases, or easements. It is essential to cure any encumbrances on the property otherwise the buyer will not have clear title.
For example, person C, the seller, has an outstanding mortgage at Bank XYZ for $100,000.00. The mortgage was recorded and is listed in the abstract. The attorney will list the mortgage as an objection and require it to be released or satisfied before the buyer takes title.
If, however, a title opinion is not completed, the buyer may be unaware of the mortgage and take title subject to the encumbrance. Suppose after title passed to the buyer, person C stops paying the mortgage at Bank XYZ. Bank XYZ would likely foreclose on the home even if the buyer holds title.
3. Whether further action is required.
The title opinion reveals whether further action is required in order for the buyer to have clear title. For example, Cindy and Rob divorced two years ago and Cindy was awarded the marital home. If Rob is still on the title for the marital home, the attorney may require Rob to sign a quitclaim deed to Cindy to relinquish any claim on the title. If this is not completed, issues could arise down the road about whether Rob has any remaining interest in the home.
Once the buyer’s attorney has completed the title opinion, the seller must cure any objections or encumbrances stated in the opinion before title can pass to the buyer. If you are buying a home, it is essential to have a title opinion done. This is especially true when there is a cash offer and lenders are not involved. Attorneys generally charge a flat rate for title opinions.
This post is only intended to be informative and is not a substitute for comprehensive legal advice. If you have further questions regarding title opinions or real estate transactions, please contact my office at 319-260-2096 or email me at firstname.lastname@example.org to schedule a consultation.