Unit 13
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Abstract of Title
A condensed history of all recorded documents affecting a particular parcel of real estate, prepared by an abstractor or title company.
Before closing, the buyer's attorney reviews the abstract of title to identify any possible clouds or defects.
Actual Notice
Knowledge of a fact that a person has gained by seeing, hearing, or reading it directly. Actual notice is personal knowledge.
When a buyer is told about an unrecorded easement and walks the property, the buyer has actual notice of the easement.
Certificate of Title
A statement of opinion by a title company or attorney on the status of the title based on an examination of the public records. It is not a guarantee.
The title company issues a certificate of title stating that, based on the records, the seller appears to have marketable title.
Chain of Title
The successive conveyances and other events that affect a particular parcel of land, starting from the original grant and continuing to the present owner.
A complete chain of title shows an unbroken succession of ownership from the government patent to the current seller.
Constructive Notice
The legal presumption that a person has knowledge of a fact because it is recorded in the public records or is visible on the property. Recording gives constructive notice.
Once a mortgage is properly recorded, everyone is considered to have constructive notice of it, even if they never actually look at the records.
Marketable Title
Title that is free from reasonable doubt, serious defects, or the threat of litigation so that a reasonably prudent buyer would accept it.
A title with unresolved liens or breaks in the chain is not marketable until those problems are cleared.
Priority
The order of preference among liens or other claims against property, usually determined by the date and time of recording.
The first mortgage recorded has priority over a second mortgage recorded later.
Recording
The act of placing documents that affect real estate into the public records of the county where the property is located. Recording gives constructive notice.
After closing, the deed and mortgage are recorded in the county recorder's office.
Subrogation
The right of a title insurance company (or other insurer) to step into the shoes of the insured and pursue any claims the insured may have against third parties after paying a claim.
If the title company pays a claim because of a forged deed, it may then sue the forger under its right of subrogation.
Suit to Quiet Title
A court action brought to establish ownership or to remove a cloud on title when there is a dispute or defect that cannot be cleared by ordinary means.
When an old, unreleased mortgage appears in the chain of title, the owner may file a suit to quiet title to clear the cloud.
Title Insurance
An insurance policy that protects the insured (usually the buyer or lender) against losses arising from defects in title that existed before the policy was issued.
The buyer purchases an owner's title insurance policy at closing to protect against hidden title defects.
Title Search
An examination of the public records to determine the current state of title and to identify any defects, liens, or encumbrances that may affect the property.
The title company performs a thorough title search before issuing a commitment for title insurance.