Title reports and title insurance are essential for any land purchase or development project.
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In order to build your building you need to be sure that you know exactly which piece of ground you own. In addition, you need to know if that piece of ground is free from liens, easements, or has any special assessments on it. Here's a look at how title reports and title insurance can help you sleep easy at night after completing your real estate purchase.
A title report can be purchased from a number of title companies. You will want to negotiate purchasing a title report for each piece of land you are considering purchasing. This applies even if you are buying land with an existing building on it. A title report usually includes at least four main items: 1) property tax info and special assessments, 2) history of the property including past owners, 3) easements, and 4) liens.
Each of these items is especially important. Obviously you want to be aware of the property taxes and special assessments, if any, on the property so that you can fully understand the costs of ownership. The history of the property is more important than you'd think. One important reason for knowing the history is environmental. If you are buying a site that used to be a dry cleaners or a gas station, you will likely have enormous environmental remediation costs, for example. Easements and liens are important because they can both limit what you are able to build on the property.
In addition to these four items, your title report goes hand in hand with an American Land Title Association (ALTA) Survey. The survey will show the property line and boundaries and give an official description of the property. Technically, the survey should match the title report exactly to make sure you are purchasing the piece of ground you think you are purchasing.
Your title report will come with a few endorsements made by the title company. There are over 100 different endorsements, but a few of them are must haves. For instance, you can get a contiguity endorsement. This ensures that your parcel is all one piece and there's nothing in the middle of it that belongs to someone else. (Think of South Africa and Lesotho.)
You can also get an endorsement for access that ensures you have access as shown on the survey.
Zoning is another important endorsement, especially if you are buying a property with an existing building on it. Some buildings were built when the zoning was different and it may have changed. New zoning code may eliminate some uses. This is especially important if you are planning on buying a property, demolishing the existing building, and building something new. Existing properties can be grandfathered in as a legal non-conforming use.
Title Insurance and the Title Company
The Title Company itself can offer you title insurance that guarantees all the endorsements and representations made in the title report. This means that they are on the hook for any errors in the report that may cause you grief down the road. This is an absolute must have for anyone looking to purchase or develop property.
The Title Company will also provide escrow and other services to help facilitate closing on the property. Be sure to ask your title company about their insurance offerings and endorsements before you commit to any one title insurance provider.