The importance of Title Search when buying Real Estate

An opinion of title is one of the most important documents in a real estate transaction. It is an attorney's professional opinion of the condition of title, based on examination of the recorded documents pertaining to the property. If the title to the subject property is later found defective, the buyer may find it difficult to be reimbursed for damages unless the attorney was negligent in the search and did not follow the standards. In Brazil real estate agents lacks in knowledge and experience, thus their opinions are not binding and do not guarantee against any buyer of future legal issues.

Today, attorneys acting as closing agents may order title insurance just as a title company does.

The reason title insurance has become the dominant method of protection for a buyer is that it will pay for losses sustained by the new owner. The two basic types of title insurance are owners' title insurance and lenders' title insurance, in this article we will refrain from elaborating on the lender's policy, not common in Brazil.

The title searcher must review all the instruments, conveyances, public records, and court proceedings to discover any material facts related to the title of a property. The searcher is ensuring that the "chain of title" is intact.

Additionally, the searcher will be careful to see that all encumbrances, such as liens, have been or will be satisfied at closing. When insuring title, the searcher wants to be certain that the claims of any other person are extinguished, or, if not extinguished, that the buyer agrees to take title subject to those encumbrances.

The sellers' names must also be checked in the records to be certain there are no judgment liens against the buyers that would "jump" onto the title immediately after recording the deed but before the mortgage could be recorded.

For an in-house examination, a title agent prepares a search sheet with copies of instruments from public records. When the title commitment is typed, it must be carefully reviewed to see that names and legal descriptions match those on the contract and that amounts are correct. If a prior title policy is available, it must be checked to see that any exceptions are carried forward to the new commitment. The buyers receive only a commitment prior to closing. The complete title insurance policy is issued after the documents have been recorded.

This is the safest method when purchasing real estate in Brazil, for any buyer and for any type of property, i.e., residential, commercial, rural, industrial, etc.

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