Property Title Transfers 101: Breeze Through This Necessary Closing Step

You received a rock-solid offer on your home, passed inspection with flying colors, and are ready to hand off the keys to your buyer. All that’s left to do is the property title transfer.

Holding title to a home signifies that you have legal ownership of a home. The concept of “title” includes a “bundle of rights” that gets transferred from the seller to the buyer, including the right of possession, control, exclusion, enjoyment, and disposition. In layman’s terms, these rights mean you own the property, can use and enjoy it as you please (legally), tell people to get off your property, and eventually sell it. When you sell a house, you transfer the title, thereby transferring ownership.

Property title transfer is a necessary step in every home sale. Still, despite its commonality, title and deed issues account for 11% of closing delays, according to the National Association of Realtors.

With expert insight from a top real estate agent, we’ll walk you through how to correctly execute a property title transfer so you can wrap your home sale and move on to your next adventure.

Step #1: Find a top settlement agent to spearhead the property title transfer

To transfer your property title, you’ll need to hire a settlement agent, such as an escrow title company or a closing attorney. Closing procedures, including property title transfers, vary by state. The settlement agent will analyze public records on the property’s history to bring to light any documentation, liens, or encumbrances tied to a house and prepare the necessary deeds to transfer title.

Madalyn Suits, a top-selling agent in Atlanta, GA, advises sellers to ask their real estate agent to refer them to settlement agents in their network. Suits, who works in Georgia, a well-known closing attorney state, always connects her clients to vetted closing attorneys who have significant experience working with title companies:

“Generally, we use attorneys who have been in the business for 25 to 30 years . . . It’s always been our policy that we only use attorneys who have been around a long time, and we’re familiar with their title policy,” shares Suits, who has assisted in the title transfer of over 800 properties. She cautions sellers that some title companies and closing attorneys in the state have committed fraud and embezzlement in the past.

Regardless of whether you’re working with an escrow company, title company, or a closing attorney, vet your representative for the following qualities:

• Properly licensed in the state where you’re buying a property and knowledgeable about local and state regulations
• Transparent about the title insurance and property title transfer process
• Boasts top-notch customer service (excellent communication skills will help speed up the property title transfer timeline)

Step #2: Consider a preliminary title report if you anticipate issues

To avoid closing delays, order a preliminary title report before you list your home. A preliminary title report, or “prelim,” allows you as the seller to discover any title issues (e.g., unresolved legal claims to the property) and resolve them upfront before a buyer is involved. A prelim can also enhance your home’s marketability; you can advertise that your home has passed the preliminary title report to assure buyers that the title is likely free of conflicting claims.

“If I do [a preliminary report], I will market it as ‘pre-inspected’ and ‘title cleared,’” says Suits.

Suits recommends this proactive step for sellers who anticipate title issues, such as sellers who have filed for bankruptcy and those selling an inherited house. In estate sales, for example, a parent may bequeath a home to an adult child who doesn’t have full knowledge of their parent’s financial or property history.

A preliminary title report includes:

• The owner’s name, the name of the individual who requested the report, the property address, and the date the records were updated.
• A detailed legal description of the property, including the lot size, any established encroachment, and property boundaries
• Restrictions on the property, such as maximum hedge heights and pools
• The current title owner and their relationship to the property (e.g., husband and wife as joint tenants)
• Outstanding property taxes
• All liens, or legal claims to the property, including those from a homeowner’s mortgage, personal bankruptcies, gambling debts, and leased solar panels

Step #3:  Perform a full title search

Once you accept an offer on your home, your settlement agent will run a full title search to identify any liens or other claims to your home, such as an unbeknownst heir. A title search is more comprehensive than the prelim as it investigates the past 30 to 50 years of the property’s history. The subsequent title report includes copies of documents relating to the property and the condition of the title. Your buyer will need this title report to obtain title insurance when they apply for their mortgage.

Suits recommends that sellers order the title search after the home inspection. The title search costs between $75 to $100 — it’s a small cost that sellers will often pick up, though you may negotiate for the buyer to cover it.

During a title search, your attorney or title company searches public records for:

• Deeds to prove property transfer
• Mortgages that show a lender’s collateral interest
• Any other liens on the property (some of these may have come up in the prelim, but the title search can find more with a deeper dive)
• Divorce cases
• County land records

The completed title report includes:

• Property details, including the address and legal property description
• Current deed holders and deed restrictions, such as pet restrictions or criteria for building fences
• The property’s history of title transfers
• Liens, like old gambling debts and mortgages
• Outstanding property taxes

Step #4: Clear title by resolving any issues

The report may reveal title issues that you’ll need to clear up before proceeding with the sale. Here are a few common issues:

• Clerical errors with public records: If someone incorrectly filed the deed on your sale or a previous sale, it’s now your responsibility to amend the record. Your title agent or attorney can file a “quiet” title action to establish clear ownership, and then the court will determine the rightful property owner.
• Liens: You’ll need to pay back debts on secured loans where your home is collateral, such as home renovation loans. If you’ve already paid the debt, reach out to the lender for proof of payment.
• Unpaid taxes: Pay any delinquent taxes for the sale to proceed.
• Missing heirs or an undiscovered will: If the title report discovers a rightful heir or an undiscovered will, you’ll need to resolve the title dispute before you can transfer the title to your buyer.
• Encroachment: If you or a neighbor built a fence over a property line, you need to clear up an encroachment.

Step #5: Arrange title insurance with your buyer

Whew — you cleared up any issues with the title . . . at least, you think you did. A title search is thorough but not airtight; it can miss issues like a previous clerical error in a public record. That’s why your buyer’s lender will most likely require title insurance to close their loan. A lender’s title insurance policy will likely be required, and this will be paid for by the buyer; however, the buyer will probably also request an Owner’s Policy, and it’s customary for the seller to pay for this policy document in many states.

Title insurance typically costs $500 to $3,500, according to the National Association of Independent Land Title Agents. Costs vary by state and the price of your home — the more your property costs, the more you or the buyer will pay in title insurance premiums.

Step #6: Sign and file the deed to complete the property title transfer

People often use the terms “title” and “deed” interchangeably, but they are unique entities. “Title” is the legal right to own a property. It’s a right, but not a physical document. A “deed,” on the other hand, is a written legal document that conveys the title to the new owner after a sale. Once the buyer and seller sign the deed, your attorney or title company will file the document with the county or other appropriate municipality.

The deed includes the following information:

• A property description
• An identification of who the grantor (seller) is and who the grantee (buyer) is
• The signatures of the grantor and grantee

Types of deeds

There are several types of deeds. These two are the most common in home sales:

General warranty deed
The general warranty deed is the most common for traditional home sales. It offers buyers the most protection by guaranteeing the property is free of liens and claims. It grants your buyer, the new owner, the property title and verifies that they did not have any knowledge of title issues, such as liens at the time of transfer.

Quitclaim deed
You may use a quitclaim deed if you are gifting your home to a child or grandchild. It offers the buyer the least amount of protection but is the most clear-cut way to transfer property. If you have an established, trusted relationship with your buyer, a quitclaim deed is a way to expedite the sale. It does not offer protection against any liens, but rather the buyer agrees to take the property “as is.”

Property title transfer is one of the final home sale steps

The property title transfer is a necessary step in every home sale. It’s not a complicated process but can become one if issues arise. Thankfully, you’ll have your real estate agent and settlement agent at your side to walk you through the process and get you through closing.

Header Image Source: (PhuShutter / Shutterstock)