What is “Chain of Title” and How Does it Protect Your Investment?
Title insurance protects property owners' right to use and occupy their land. For some homes and/or properties, the title can be limited by rights and claims asserted by other individuals. If someone else brings a claim against your property, your ability to use and enjoy the land may be reduced and/or you may suffer great financial loss. That's where title insurance comes in.
Title insurance is your first line of defense against these potential hazards. Property is often the biggest investment most people make in their lifetimes, and it is crucial to protect this investment with title insurance.
Title Insurance Focuses on Risk PreventionWhereas other forms of insurance guard against risks by assisting you after an incident occurs, title insurance manages your risks by focusing on preventing risks BEFORE they occur. In order to do this, title insurance companies rely heavily on something that is known as "chain of title."
What is "Chain of Title"?Chain of title is exactly what it sounds like - the chain linking all the individuals who have ever held title to a specific piece of property, in sequential order. By looking at the complete history of the title to a piece of property (by conducting what is known as a “title search”), title companies at the Lake of the Ozarks can identify any potential liens, unpaid mortgages, and other hazards that might limit the buyers' use and enjoyment of the property.
*Full Title Search:
The full title search is compiled by the title company. The title company performs a search of county public records in order to issue title insurance, and liens against property are listed as “exceptions” to a title policy. The title report will include a legal description – basically, a written description of the property’s location and boundaries encompassed within the property. The majority of what is included the legal description is what you won’t see in your real estate marketing. The title report also includes property taxes and mortgage liens.
A full title search will show the full chain of title on the property. A title search is the running of the title, an abstract of title, that goes back 30 years for title insurance purposes.
Chain of Title is Different than Abstract of TitleSometimes people confuse the chain of title and the abstract of title. While these two documents are similar, they serve slightly different purposes. The chain of title provides an in-depth description of every owner of a specific piece of property, whereas the abstract of title simply provides a basic summary.
The title professionals at Arrowhead Title, Inc. typically use the information provided in the abstract of title when preparing title insurance. If we have any questions or stumble across something in need of further explanation, we turn to the chain of title to get all the little details.