Understanding What You're Really Buying
When you buy property, you're not just buying the physical structure -- you're buying legal ownership, encumbered by whatever liens, easements, and restrictions happen to affect that property. Before you close, you need to know exactly what you're getting. This is where title searches and title insurance come in.
Many buyers treat title search and title insurance as rubber-stamp requirements, something that's handled without much involvement. But these are critical protections that can make or break your transaction. Understanding what they are, what they reveal, and what they cover can protect you from buying into a costly title nightmare.
What a Title Search Reveals
A title search is a public records investigation that uncovers everything recorded against a property. It traces the chain of ownership going back multiple years (typically at least 40 years in New York), identifying deeds showing prior transfers, mortgages and liens securing debts, tax liens, judgment liens, easements, restrictions, and other encumbrances.
In New York City, title searches are conducted through ACRIS (the Automated City Register Information System) for all post-September 2013 transactions. For older documents, searches go back to the appropriate county clerk offices in Manhattan, Brooklyn, Queens, the Bronx, or Staten Island.
A title search will reveal if:
- The seller actually owns the property by showing a chain of deeds leading to the current seller
- The property is subject to a mortgage or other lien that must be paid off at closing
- There are judgment liens recorded against the owner
- Tax liens have been filed by the city, state, or federal government
- Easements allow others to use parts of the property (utility easements, access rights, etc.)
- Covenants or restrictions limit how the property can be used
- Mechanic's liens have been filed by contractors claiming unpaid bills
- Pending litigation (lis pendens) affects the property
The title search is an investigative tool that professionals use to identify problems before closing. If the search reveals any liens or encumbrances, they must be understood -- whether they'll be paid off at closing and whether they affect your ability to use the property.
Title Insurance Commitment and Coverage
The title search is followed by a title insurance commitment, issued by a title insurance company. This commitment is the title insurer's promise of what it will and won't insure, and it's critical to review carefully.
The title insurance commitment lists all the property identification information, the title insurer's obligations, and exceptions to coverage. The exceptions section shows what will not be covered by the final title insurance policy. These exceptions typically include matters revealed by the title search that the insurer is unwilling to guarantee against, such as existing liens, easements that benefit neighboring properties, or zoning restrictions.
Your advisor's job is to review the commitment and determine which exceptions are acceptable and which must be eliminated before closing. For example, if there's a mechanics lien on the property (a contractor claiming unpaid work), that lien must be paid off at closing and removed from the title before your purchase. If there's an easement allowing a utility company to access the property, that's probably acceptable and won't prevent your use of the property.
The title commitment also lists any requirements that must be satisfied for the title policy to be issued. These might include: receipt of a recorded satisfaction of an existing mortgage, receipt of an affidavit addressing a title gap, proof that property taxes are current, or receipt of a restrictive covenant modification.
Under New York law, the title insurer must issue a final title insurance policy after closing, reflecting the state of title as of the closing date. This policy is what actually insures your ownership.
What Title Insurance Covers and Doesn't Cover
Title insurance is fundamentally different from other types of insurance. It doesn't protect you against future problems; it protects you against title defects that existed before the policy was issued but weren't discovered.
Title insurance will cover you if:
- Someone else claims they own all or part of the property
- A prior owner's heir or descendant emerges claiming ownership
- A forged document appears in the chain of title
- A prior mortgage or lien wasn't properly discharged and resurfaces
- A mechanic's lien or judgment lien was recorded and never discharged
- Boundary disputes arise due to survey errors
- An error in recording creates a defect in the chain of title
Title insurance will not cover:
- Encroachments (another's structure crossing your property line, unless discovered through a survey before closing)
- Zoning violations (the property being used for a purpose not permitted by zoning)
- Environmental problems (contamination or hazardous materials)
- Physical defects in the property
- Property taxes owed
- Mortgages or liens that were on the title commitment but were not removed and known when you purchased
Critically, title insurance only covers matters that existed before closing but remained undiscovered. If you discover that the property violates zoning laws after you purchase, title insurance won't help because zoning issues aren't title problems -- they're land use problems. Title insurance is extremely valuable for protecting against hidden ownership claims and recording errors, but it's not a catch-all.
The Importance of Survey and Special Endorsements
A survey is not part of the title search or title insurance, but it's a separate investigation that reveals physical boundary issues. A licensed surveyor physically measures the property and identifies structures, easements, encroachments, and boundary lines.
Surveys are not required for most residential purchases, but they're valuable if: you're concerned about boundary disputes with neighbors, you plan to build an addition or fence, the property has irregular boundaries, or you're purchasing vacant land.
Title insurance can be enhanced with special endorsements that provide coverage for specific situations. For example, a homeowner's coverage endorsement extends coverage to unfiled liens or defects, an access endorsement insures that you have legal access to the property, a mortgage amount endorsement insures coverage up to the mortgage amount, and a survey coverage endorsement insures against boundary issues revealed by a survey.
Your advisor should discuss which endorsements make sense for your specific purchase. For most residential buyers, the basic owner's title policy is sufficient, but certain situations warrant additional coverage.
Conducting an Effective Title Review and Closing Preparation
Effective title review begins when you make an offer and continues through closing. The title commitment should be obtained early in the transaction and reviewed in detail, identifying any exceptions or requirements that need attention.
Red flags that require investigation include:
- Documents in the chain of title from more than 40 years ago (suggesting a possible gap in the chain)
- Multiple quick transfers (suggesting possible fraud or title issues)
- Liens that don't specify what they're for
- Mechanical liens that appear to be old but haven't been discharged
- Easements with unusual language or unclear purposes
Any title issues should be communicated to the seller's side and resolved before closing. This might involve requiring the seller to pay off liens, obtain subordination agreements, provide curative affidavits addressing title gaps, or obtain releases of restrictions.
At closing, you should receive the final title insurance policy showing the state of title as of your ownership and confirming that your purchase money mortgage (if any) is the first lien on the property.
How Keystone Pinnacle Can Help
Whether you're navigating an estate property sale, exploring investment opportunities, or need guidance through a complex real estate transaction, Keystone Pinnacle Property Advisors is here to help. Our team specializes in guiding families through the real estate aspects of estate settlement throughout Brooklyn, Queens, Nassau County, and the greater New York area.
Contact us today for a free consultation, or call (516) 703-6942 to speak with an advisor.
