Georgia Real Estate - Section 20 Unit 2

In Georgia, how many years do we have to go back to trace the chain perfectly, with no gaps in ownership?

50 years

Which option best describes an abstract of title?

A document that provides a summary of the title history of a property

Chain of Title in Georgia continued

Another problem may be that a title is clouded by judgments against recent owners, or lawsuits may be pending that could affect the title. More information about this can be found, respectively, on the judgement rolls and in the lis pendens index at the office of the county clerk. A search for more information on mechanic's liens on a property (made by workers or material suppliers) would involve a search of public records and possibly an on-site inspection. There are many other places that can be searched for more information to repair a broken chain of title, including pulling tax records, birth certificates, marriage and divorce files, adoption records, probate records, and military files just to name a few. The abstract of title is the document showing the chain of title for a property. It contains a description of the property and summarizes any records related to the title. An attorney must certify the abstract (lawyer's opinion of title). If an abstract of title already exists for a property, an attorney can update it through a process called abstract continuation.

According to the Georgia marketable title acts, the statutory limit is 50 years. Marketable title legislation ______.

Automatically quiets any title claims after a certain amount of time

What information does Schedule A of an ALTA title commitment in Georgia provide?

Basic facts related to the transaction

What information does Schedule A of an ALTA title commitment provide?

Basic facts related to the transaction and property, including a legal description

Which of the following documents is used to create the title commitment?

Certificate of title

Matt is getting ready to sell his home. Before the property is sold, a title search is conducted to determine if there are any ______.

Defects on the title

A homeowner lives in a state that requires an abstract of title for property conveyance, but the chain of title was broken 50 years ago. What is the status of the title?

Depending on state laws, the homeowner may have marketable title

We know the title company searches public records for information. Which three of the following does it verify?

Divorce Secured transactions Judgments

What are the five most common title issues mentioned in this video?

Errors in public records missing heirs Forgeries Unknown liens Survey or boundary issues

In a sales transaction where the buyer needs to obtain a loan, the lender requires that a title search be conducted. The title search will look for evidence of title, also referred to as proof of ownership. Which of the following describes what proof of ownership is, within the real estate transaction?

Evidence that the title is marketable

A quiet title suit is designed to keep property ownership anonymous.

False

An abstract of title requires a real estate broker to certify the abstract.

False

Chain of title in Georgia must go back 30 years to be considered marketable.

False

Marketable title acts require a visual flowchart that summarizes the entire chain of title and makes it more marketable.

False

Title issues result in bankruptcy.

False

You should advise clients to terminate the purchase if the property title search reveals a cloud on the title.

False

After purchasing a property, what can the buyer do to clear a possible future claim on the property's title?

File suit to quiet title

Anita is a new buyer. Luckily, ______ will help her before the sale and can reimburse her after the sale if a title issue arises.

Her title insurance

Lisa purchased an older home with a large backyard that's perfect for her pack of collies to romp in. Six months after she bought the property, a total stranger knocked on her door and told her he's the true property owner. After investigating, it turns out the person who sold Lisa the property had forged the deed without the true owner's knowledge. What's true about Lisa's situation?

Her title insurance policy may protect her from loss

Marketable Title Acts

If a chain of title had to go all the way back to the beginning—when the government first granted the property to its inaugural owner—title attorneys would have a lot of work on their hands, digging through centuries-old pieces of parchment. To make creating abstracts easier and more accurate and maybe help prevent dust mite overexposure, several states have enacted marketable title legislation, which automatically quiets any title claim after a certain amount of time. If someone comes forward claiming title or an encumbrance dating past the statutory period, they're out of luck. These laws don't take the place of legal notice, nor do they count against adverse possession claims. Here are some other states' limits on title claims: ---50 years: Indiana, Georgia ---40 years: Connecticut, Michigan, Utah, Vermont, Wisconsin ---30 years: Florida, North Carolina, Oklahoma ---22 years: Nebraska

Title Issues continued

In addition to title insurance, which can protect the policy holder if a title issue does arise, a seller may choose to remove any cloud on the title by initiating an action to quiet title. A quiet title action involves locating a person who may have some claim on the title and obtaining a document from that person to prove that a debt, for instance, has been paid or corrected. The court can also officially cure defects with a court order filed in the county records. If the cloud is discovered before title insurance is obtained, title companies won't issue that insurance. Or, it could provide insurance but will "except" any claims regarding the cloud, in effect insuring around the cloud. As a licensee, you should never encourage your client to move forward with a purchase that involves a clouded title unless the cloud will be removed at closing (e.g., a mortgage loan that will be paid off at closing), or until the cloud is removed or the insurance company has agreed to cover the issue. This is especially true for foreclosed properties, which may have hidden title issues.

A cloud has appeared on the title and, as the owner, you want to remove it.

Initiate a Quiet Title Suit

We know the title company substantiates claims of divorce, secured transactions, and judgments when it does a title search. What three other things will a title search verify?

Legal property description Ownership Encumbrances

Evidence that the buyers will be able to sell or use the property as collateral to obtain a loan

Lender requirement

Proof of title insurance for buyers who are taking out a loan

Lender requirement

Proof that the property is free and clear of all obligations and debts

Lender requirement

A title officer will perform a title search in order to ______.

Make sure there are no clouds on the title

We know that the title commitment is a title insurance company's promise to issue an insurance policy on a property, but when will this issuance happen?

Once the final settlement on the property has occurred and conditions named in the binder have been satisfied

As a licensee, you're helping a couple buy a new home when you come across issues that could mean there's a cloud on the title. What should you do?

Recommend the couple find another property to purchase, or ask the seller to settle the title through a quiet title action to clear any cloud before moving forward with the sale.

What's the purpose of a quiet title suit?

Remove any claims against a property's title

When reviewing a title commitment, where will you find basic details about the transaction?

Schedule A

Where can a party reviewing a title commitment find basic details about the transaction?

Schedule A

In a typical transaction, which of these title defects is unlikely to cause a problem for the buyer?

The seller's existing mortgage

Your client, Ray, is worried about title issues that may arise after closing. Remind Ray of his secret protection: ______.

Title insurance

A cloud on title caused by unpaid property taxes can be removed by paying the taxes.

True

In Georgia, what is the time limit on title claims?

50 years

Teddy continued his pitch. "Okay. So you've got this property. This dilapidated plantation manor outside of Atlanta. Columns, wrap-around balconies, the whole nine yards. An investor wants to buy it and turn it into an historic B&B. But it's been abandoned for years. Who owns it now? Who owned it then? Before the guy can buy it, we have to find out." In Georgia, how many years do we have to go back to trace the chain perfectly, with no gaps in ownership?

50 years

"So this is where the drama comes in," Teddy said. "Let's say we get to a link in the chain and find that the rich widow who owned it last wasn't actually the owner, that her dead husband willed it to a secret love child he'd had with the family maid, then the link is broken. Oh no! Now we have to piece the chain back together!" Where might we find the information we need to do this?

A birth certificate

Which one of the following best describes an attorney title opinion?

A statement of opinion on the status of the property's title, based on the abstract of title

What's the definition of a marketable title?

A title that is clear and free of encumbrances

Which of these statements about an abstract of title is correct?

An abstract is a condensed history of all recorded documents that impact the title

What's a quiet title action?

An action to locate and notify all who may have some claim on the title, and determine the validity of all claims

What is a title commitment?

An agreement by a title insurer to issue the final title insurance policy on the property

Evidence of Title continued

Before lenders will loan money to buyers to purchase property, they want proof or evidence that the title is marketable, and that the buyers will be able to sell or use the property as collateral to obtain a loan. To prove this, the lender will require that a title search be conducted. The title search will establish proof of ownership on the seller's part, also referred to as evidence of title, which often comes in the form of a physical deed. It will also work to establish proof that the title is clear, meaning that it is free of any other defects or clouds to which a reasonable buyer might object (like outstanding loans), and that would hold up or prevent the sale. For a title to be marketable, both the evidence of title and the absence of clouds are required. Sellers usually prove their ownership and the marketability of the title through a title commitment or abstract of title, provided by a title company as a result of a title search. In addition to this, a lender will require that buyers who are taking out a loan purchase title insurance to protect the lender against loss resulting from issues with the title that weren't uncovered as part of the title search. When a lender is satisfied that the title is marketable and is protected against any future adverse claims by title insurance, this barrier to issuing the loan is removed.

If a property has a legal claim against it, what is the property said to have?

Cloud on title

Quiet Title Suit

Ideally, you'll have sunny skies and smooth sailing when title searches are performed on properties you're involved with. But every now and then, a cloud is bound to appear—a cloud on the title, that is. A cloud on title is any encumbrance, such as a lien or inheritance claim, that impedes the conveyance of a property. Since a title must be good or marketable in order for the property to transfer, the cloud must be removed before closing. If the title cloud is relatively straightforward, like unpaid property taxes or homeowners' association dues, the cloud can usually be removed by simply paying the debt before closing. In the case of a foreclosure or inheritance claim, the claimant (or former owner, in the case of a foreclosure) can sign a quitclaim deed, which removes any claim they may have to the property. When more extreme measures are necessary, cloud removal is accomplished through a quiet title suit, where the property owner initiates court proceedings to remove or "quiet" any claims to the property. Claimants can come to the hearing to state their case, and a judge rules on the claims' validity.

A cloud has appeared on the title to the property you own and want to sell. You need to locate a person who may have some claim on the title and obtain a document from that person to prove that a debt, for instance, has been paid or corrected.

Initiate a Quiet Title Suit

Teddy could see that Frasier's eyes were starting to glaze over, so he picked up the pace. "Okay, okay. We can make the show a race against time. The investor's got three days to figure out if there's enough historical value in this place to make it worth his time. We can have a countdown clock, wrapped in a chain—because it's Chain of Title, right?—or we can have these graphics of disconnected links in the chain, and every time we uncover a previous owner, the links link up, forming a longer and longer chain, until we hit that 50-year threshold for chain of title." "And what's the point of the chain?" Frasier asked. "Great question!" Teddy replied. So what IS the point of chain of title?

It protects the buyer by ensuring that all people who have claimed to own the property actually owned it

Which one of the following is a characteristic of an abstract of title?

It provides an attorney's opinion of the title

Ignore the issue

Not a Way to Mitigate

Proof of title insurance for sellers who are selling the property

Not a lender requirement

The Title Commitment

Once the title search is complete, the title company should be able to identify a chain of title. The chain of title establishes the title history or the path and proof of ownership for a property. This is accomplished through a search for successive conveyances of title and encumbrances documented in the public record. Each owner is considered to be a "link" in the chain. Any breaks in the chain or issues uncovered during this search are considered clouds on the title. The abstract of title is the document showing the chain of title for a property, which is a summary overview of the property's title history. A certificate of title is then provided, which is a statement of opinion regarding the status of the title. This can be provided by the title company, or, as required in many states, by an attorney. When an attorney is the one to provide the certificate of title, it's usually referred to as an attorney title opinion. The certificate of title is used to create the title commitment. The title commitment is an agreement by a title insurer to issue the final title insurance policy on a specific piece of property once the final settlement on the property has occurred, and specific conditions, as named in the binder, have been satisfied. The title commitment is the title insurance company's promise to insure and show the condition of title at a specific point in time. Keep in mind that this commitment isn't the actual title insurance policy; instead, it's merely a statement of the terms and conditions under which the title insurance underwriter is willing to issue the title policy.

We know that the title company searches for any title defect that might exist on a property, but where does the title company find this information?

Public records

"Or another example," Teddy continued, "is a contractor who placed a $50,000 mechanic's lien against the house when Sam Crane didn't pay him for the new roof he installed, resulting in a broken link in the chain of title." Where will Sam find what he needs to repair the broken link?

Public records or onsite inspection

As the buyer, you want to be reimbursed after the sale if a title issue does arise.

Purchase Title Insurance

What can buyers do to protect themselves from title issues when purchasing property?

Purchase title insurance

As a licensee, you're helping a couple buy a new home. The title company discovers a cloud on the home's title. Which one of these is your best course of action?

Recommend the couple find another property or get the seller to quiet title

Chain of Title in Georgia

The chain of title establishes the title history or the path and proof of ownership for a property. This is accomplished through a search for successive conveyances of title and encumbrances documented in the public record. Each owner is considered to be a "link" in the chain. The chain begins with the current owner and then goes back in time and must be unbroken for the title to be considered good or marketable. Often the chain goes back to the original sale or grant of the land from the government to a private citizen. However, it's not usually necessary to go back that far. In Georgia, a chain dating back 50 years is considered sufficient to show marketable title. Sometimes, while tracing a chain of title back through time, an apparent break or dead end will occur. This can happen for a number or reasons, including death or foreclosure. At this point, to regain the title sequence and repair the link (so to speak), the search must go beyond the recorder's office to probate (in the case of a death) or civil courts (in the case of foreclosure). It's very important to make sure the link is repaired, because a broken link means the present owner does not have a valid title and therefore doesn't legally own the property.

"Oh, man!" Teddy said, slapping his forehead. "The Golden Abstract! The prize at the end of the title search, when the buyer is presented with the abstract of title!" What is an abstract of title?

The document showing the chain of title for a property

"It's the next big thing in reality television," Teddy began. "It's Sherlock Holmes meets Property Brothers meets Who Do You Think You Are. It's called ..." -Teddy loved this dramatic pause— "Chain of Title." Much to Teddy's chagrin, Frasier's stern face remained unchanged. What is chain of title?

The sequence of historical transfers of title to a property

Which of the following statements about the title commitment is true?

The title commitment is the title insurance company's promise to issue a title insurance policy

You know that a title search will need to be performed before a title insurance policy will be issued and your buyer's loan can be funded, but who or what entity can your client expect to conduct the title search?

The title insurance company

What's a title commitment?

The title insurance company's promise to issue a title insurance policy to the buyer

Paula is bidding on a property that's being sold at a foreclosure auction. She's excited about the great deal she's getting on the property after she finds out she submitted the winning bid. What could cause Paula's great deal to turn into a nightmare?

The title to the property may have hidden issues that could cost her a lot of money to clear

What special concern do foreclosed properties often present?

There could be hidden title issues

Which one of the following protects the owner against financial loss if the real estate title has defects?

Title insurance

Evidence of Title

Title is the legal concept of property ownership and all the rights that go with it. The real estate industry recognizes two standards of title that may be conveyed: marketable title, and insurable title. Marketable title is the more rigid standard. A marketable title has no defects or clouds to which a reasonable buyer would object. It's not necessarily a perfect title. Sellers can convey marketable title if the title search reveals no doubt about property ownership and there aren't any liens, debts, or encumbrances that won't be cleared at closing. An insurable title is one against which there may be known defects (such as easements), but the title company has notified the parties of the defect and has agreed to insure against it and not list it as a policy exception. As the less-rigid title standard, insurable title is still acceptable to most buyers. A key concern is that sellers who offer insurable title rather than marketable title may not have to clear up the title problems that come up before closing. The safest decision is for buyers to receive marketable title that's backed by title insurance.

Title Issues

Title issues can occur, especially with foreclosed properties that may have an unclear chain of ownership. Title issues can be a problem because: --They can make financing difficult. --They put ownership in question. --They can make it difficult to resell the property later. Most residential properties that have title defects usually have them in the seller's existing mortgage. The title company should identify issues like these and clear them up at or before closing. For more thorny issues, even if the buyer of a property is paying cash and doesn't care that a title is unclear, and even if no one ever shows up to contest the buyer's rights of ownership, when it comes time to resell the property, the next buyer may balk. It may be difficult for the property to be sold with an unclear title.

Jeff has filed a quiet title suit against Roger. What's the purpose of this suit?

To clear up a cloud on title

What is the purpose of the title search?

To collect evidence that the title is a marketable title, meaning it's clear and free of encumbrances

What's the purpose of a chain of title?

To establish history of past ownership

What is the purpose of marketable title acts?

To make creating abstracts easier and more accurate

A quitclaim deed does which one of the following?

Transfers without warranty any interest or title the grantor has when conveying it

A cloud on title caused by a foreclosure or inheritance claim may be resolved by the execution of a quitclaim deed.

True

Abstract of title provides a summary of the title history.

True

Chain of title establishes the title history or the path and proof of ownership for a property.

True

Foreclosed properties may have hidden title issues.

True

If a break occurs in the chain of title, the search must go beyond the recorder's office.

True

Title issues can cause financing difficulties for a prospective buyer.

True

Title issues can make it difficult to resell a property later.

True

Title issues put ownership in question.

True

Initiate an action to quiet title

Way to Mitigate

Purchase title insurance

Way to Mitigate

Despite Frasier's apparent disinterest, Teddy went on. "We start by finding out who the present owner is. Say it's a guy who bought it 10 years ago on a dare, Sam Crane. We go into the public records under the grantee index and find Sam's name. But we need to make sure it's still his, that he hasn't sold it to anyone else. So we check the grantor index for the 10 years between now and when he bought it, and his name doesn't show up—so we know it's still his." What happens next?

We track the chain back in time 50 years

The Title Search

When a title company conducts a search for title issues, it searches public records. As part of its search, the title insurance company may verify the following information: --The legal description of the property: Can the property that is being transferred be correctly and accurately identified through a legal property description? --Ownership: Who rightfully owns the property, and how is title held? --Encumbrances: Are there any existing liens, easements, or restrictions against the property? --Judgments: Are there any outstanding judgments against the property at the municipal, state, or federal level? Is there any pending civil litigation? Is the property under foreclosure proceedings? --Divorce: Are there any pending divorce proceedings? --Secured transactions: Has the property owner entered into any agreements that give a creditor or creditors ownership rights to the property should the current owner be in default?

The Title Commitment continued

terms and conditions under which the title insurance underwriter is willing to issue the title policy. Title commitments vary by state and company, but generally include the following sections: --Schedule A: Provides information related to the transaction --Schedule B: Lists unrecorded matters that either couldn't be or weren't researched in preparing the report --Schedule C: Lists recorded objections that could be found These schedule names and numbers may vary based on the form used. The important thing to note is that all commitment forms contain the information found in these schedules.