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             15 April, 2024

Category:  Articles » Finances » Insurance


What is an Abstract of Title?

         Views: 2308
2009-09-15 02:29:54     
Article by Joel D McDonald

If you are purchasing real estate, you may have heard the term, "abstract of title" and wondered what it is. When it comes to purchasing real estate, it is important to know that the abstract of title is the history of ownership in a particular piece of property, also referred to as the Property abstract. Title policies are issued based on the abstract of title, which gives a chain of title dating from your purchase backwards to the original owner of the real estate, since public recording started, with all liens, property sales, and purchases in-between.

Back before there were title companies to issue insurance, a property owner may have gotten an abstract of title, along with the deed. They were on their own as to how clear the abstract of title actually passed ownership. When properties were held and sold from generation to generation within a family, this might not have been concerning. As other factors came along besides first mortgages that could cloud a title, such as second mortgages, home equity lines and divorces, the abstract of title might have an attorney's opinion of title in the abstract of title.

Over time, the abstract of title on properties became quite lengthy and too complicated for the average property purchaser. With the evolvement of the title insurance industry, policies were issued assuring a purchaser that the abstract of title passed clear title, without worry. Now, when a title search is done, it checks all public record filings for any claims against a particular piece of property. The title insurance company searches an abstract of title, which is updated with each change of ownership.

When you close on your real estate transaction, you probably will not see an abstract of title, since these are now stored on microfiche, in most cases at the county courthouse. You will receive a title insurance policy that is based on the title search results, which include making a judgment on the abstract of title. When your title insurance policy is issued, it might contain exceptions. It is important that you review these exceptions, because those are items that the title insurance will not make a ruling on, when it comes to getting title, free and clear.

If the exceptions are serious, the lender may back out of financing. On the other hand, exceptions can cost you money to remedy, even if it is a strip of land that is only a foot wide. An example of an exception might be a fence that was built several years ago, and notation was made that it was a foot over the property line. The title insurance policy may list it as an exception, which means they will not cover any expense of paying a claim resulting from moving the fence or purchasing the additional strip of land, in the event it comes up in the future. Utility easements are commonplace as exceptions and not a real need for concern, in most cases.

Abstract of title is an important part of a title search and title insurance policy. Even if you are purchasing property from a relative or friend, you should still have a title company do a search, a ruling on the abstract of title, and issue a title insurance policy, for your protection.

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