Detailed Ownership Report Process
The following components are necessary in a detailed Ownership Report
Basic property information
When starting due diligence you should consider - what is the basic property information? This question will determine the scope of your research. To keep this simple, a minimum standard of information in this area would be: An Effective Date and common address and/or Property Identification Number (PIN). What is an Effective Date? And where would you find this information?
An Effective Date, also called a “coverage date”, is the date by which a County Recorder is covering recordings, (typically this would be a date prior to the current date).
The time between the Effective Date and current date is called the “Gap”. This gap period is unknown to the researcher, and anything could have been posted to the land during this time. To assume minimal risk in the gap one must understand what is currently happening, up to and including the Effective Date.
What is the address and or Property Identification Number (PIN)? You should already know the common address, and the PIN can be researched through the County Clerk or County Treasurer's office. Sometimes these two offices might be combined (as is often the case in smaller counties). Often, you might be able to find a County Map Department with an online search database through which the PIN can be produced.
It should be noted that largely undeveloped or rural land frequently does not have a common address assigned. With the property search narrowed now to a specific parcel, we have excluded possible distractions from our land search. This is helpful when faced with a vast area of land, where a restriction might affect just a small portion but not the parcel in question.
It is the legal description, not the Tax PIN by which your land is bound. Tax PIN numbers change and are reassigned as new subdivisions are created, or when land is altered. Therefore, it is critical to understand the encompassing land. You will need to obtain a Tax Map and compare this with your vesting deed. Comparing legal descriptions with deeds can be tricky, especially if portions have been subsequently deeded out of the land in question.
Most Counties have a GIS website that will allow you to search by PIN and provide section lines and even subdivision names. Other Counties allow you to download their Tax Maps. Give yourself ample time to understand the legal description and compare it with the deed. If you run into any problems, the County Map Department probably have people on staff who can help in person. Request an official “Clerk’s Legal Description” if the legal is confusing, or contrary to evidence in further title research.
Current Owner Vesting
Search online or at the County Recorder Office for the land records of the property in question to identify the current vested owner. Each County Recorder Office is set up a little bit differently, with different resources and research tools.
The most common methods to search are PIN based and by Grantor/Grantee. Once you find your chain online, or at the County Office, you need to search from the last Warranty Deed, or deed with transfer stamps and preferably Title Insurance markings (example: Chicago Title, Stewart, Old Republic).
The reasoning for this is if the Title Company has insured the title prior to the Warranty Deed as being clear and defects would have been corrected by the time of sale, otherwise the current owner of the property may have a potential claim against the Title Company. At this time, you should check the deed over and take note of the legal description of your deed.
The legal must be a portion, or all, of the land of your subject property. This can be identified when comparing the legal description in the deed with the County Tax Map. Now that the ensured Warranty Deed has been identified, continue looking at the chain of title to see if other deeds are present, such as a Quit Claim Deed, or maybe a Probate Administrative Deed, or something else. You will want to tie the grantors and grantees together and make sure that the vesting chains forward completely, and do not leave out any interest in the land.
Open Liens, Mortgages, Adverse Matters
While examining the ownership vesting, look from the last Warranty Deed going forward to identify open liens, mortgages and adverse matters. Adverse matters might include; leases, UCC Financing, or Mechanic Liens, or Judgements, or even Agreements.
If you see items such as a release, or a termination, you should exclude the corresponding recorded document that it references. The end result should be a list of active documents affecting title. These documents should then be looked over to make sure a misposting did not take place through comparing the legal descriptions in the recorded documentation, as well as all partiesinvolved.
At this point, it is best to purchase the copies of the documents pertaining to the affected area, if you have not done so already. As a general rule, the less open matters, the more clear the title is. Thus, the less risk for an investor or potential purchaser. A lay person should still have a qualified real estate attorney review subsequent documentation, but this exercise will allow you to be an informed consumer.
When considering real estate due diligence, a common assumption is that you are examining current tax records only. It is vital that you understand taxes accurately. Taxes can be purchased by tax buyers or sold by tax sale.
Much like the land search, the name search on the current owners (and their entities) can be complex. However, it is critical to identify any open judgments or litigation. A set of questions needs to be asked and answered. In no particular order, these are: 1) Is there a Federal Tax Lien?, 2) What about UCC? 3) Is there a State Tax Lien?, 4) Is there current litigation?