Volume 7 Number 2

 

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Title Tips by Tute

Volume 7, Number 2

Dear Readers: 

    Lamentably, no unique or novel questions were forwarded from the editor in time for this issue. As a result, Tute is forced to assume everyone is too busy handling mundane day-to-day business (nine rate cuts in 10 months does tend to cut into one's free time) to forward more esoteric concerns. This does present an opening, an opportunity if you will, to review some basic issues that go to the very existence of the title examiner. Those with a journalism background may remember that certain basic questions need to be addressed in every news article - who, what, where, when, why and how - in order to induce the reader to continue to read, and not to buy the publication solely for the purpose of lining their pet's living quarters. In this issue, Tute will try to show where the examiner fits into the real estate transaction and the preparation of the title insurance policy. I am deeply indebted to LandAmerica Financial Group for providing me with a CD copy of SingleSourceTM v. 1.2 , portions of which I have shamelessly plagiarized.1   I make no attempt to instruct the reader in the mechanical tasks of examination today; rather, I attempt to address the underlying question of why there are title examiners at all. (If Tute must wax philosophic, it is with the recognition that Bill Cosby's discussion of the innate superiority of Physical Education majors over Philosophy majors in his routine "Why Is There Air" says it all so much better than I can.) Mechanical discussions are reserved for future issues. Tute specifically will not address any perceived distinctions between "searchers" and "examiners," leaving that to the conscience of the reader.

    Searching is a technical skill. It is the process where an individual, called a searcher, systematically researches the history of title and gathers information on a specific parcel of property. Some of the key attributes of a good searcher include accuracy, comprehension, and the ability to efficiently gather information in the least amount of time necessary.

    Examining is also a technical skill. The examiner reviews the documentation from the title search (and may review the search procedures, as well). This review includes closely inspecting each document in the chain of title for sufficiency, and determining its role in the overall title history of the property. The ultimate concern of the examiner is how all of these documents relate to our issuance of title insurance.

    Accuracy: The searcher's task is to obtain all the appropriate information relative to the title to the property to be insured. Failure to obtain the correct information or all of the information has serious ramifications. At a minimum, additional work is required later to complete the search. This is time-consuming. Customers may be inconvenienced, and customer relationships may be strained. The reputation of the company may suffer. Even worse is that missed, incorrect, or incomplete information may result in a claim against the policy - a claim that, by its nature, was preventable. Accuracy is critical.

    For an examiner, accuracy relates to the consistent and complete review of the documentation. Among the many things an examiner may check are the names, signatures, and notary acknowledgement on documents; the succession of title; the interests or rights created by certain documents; and the impact of terms, conditions, or provisions contained in documents. It is essential that the examiner accurately and correctly assess each document. A "simple oversight" can become a devastating claim.

    Comprehension: The understanding of the history of the specific title and the documents in the chain of title is essential. It is that understanding which always directs the next step in the search process. Some searches can be relatively simple, while others are very complex. This is particularly true when searching multiple parcels, properties with multiple owners in title or with frequent changes in ownership, or properties with complex legal descriptions. Also, some documents, which, at first glance, appear to be simple, can give the searcher clues to other matters that need to be investigated. If you, as a searcher, don't completely understand the search you are working on, how can you be certain that you have discovered all the pertinent information?

    An examiner must fully understand the search process. Only then can he/she be certain that he/she has the complete and appropriate information to examine. The examiner must have complete comprehension of the documents being examined and the ways they interact. And, very importantly, the examiner must understand the ways in which transactions are structured; from the typical to the creative.

EXAMPLE: Typically, most of us who buy homes do not pay cash. We usually obtain financing in the form of a loan from a bank. The bank loan is used to pay the seller and to pay off the seller's loan, which he took when he bought the property. Suppose the examiner were examining a title search for a sale transaction and found no outstanding mortgage. It would appear that the seller paid cash. Understanding that this is not the usual case might lead the examiner to double-check the search, making sure that all of the proper indices had been checked, or to ask the searcher to recheck an index, or to check an index previously not considered. It might be necessary to contact the customer to find out if the seller in the transaction had disclosed any loans against the property, or if it had been represented to be free and clear.

Valuable clues to the condition of title come from the comprehension of all facets of title searching, documents, and their interrelationship. Misreading these clues, or not fully understanding the substance of the exam, can lead to claims against the policy.

    Efficiency: As a searcher, you will find yourself looking at many different types of records and in many different places for information. Nothing is more frustrating than to locate a document and then have to go back later and retrieve the one next to it. Organization is the key. It will make your job easier, and will help you remember all critical parts of the process. In addition, in any market, employers are always looking for ways to reduce costs. High-volume, high-quality production is greatly valued.

    As an examiner, you will find it much more productive to systematically examine your files. With the tremendous number of variables in title examinations, a regular system, coupled with the use of checklists, will improve overall efficiency; you will be certain that you have not missed or forgotten to look at something. You will not have to resort to backtracking because you don't remember whether or not you've completed some critical portion of the exam.

    Depending on the system of doing business in your locale, you may be searching and examining title, or you may be examining the work of another in addition to examining title. This is part of the dual nature of an examiner. Most VLTA members utilize lay examiners; that is, employees or others who have been specifically trained to understand how a title insurer views the impact of documents, recording, and conveyancing. This is not to be confused with legal training. Although many of the considerations may be the same, title companies and agencies approach everything relating to the title to real property from this question: "How does this affect the way in which we can issue title insurance?" As a searcher, you are concerned with whether or not specific documents have any effect on the title. As an examiner, you are concerned with how those documents affect the title.

    Record room searching is the basis from which all title and abstract plant systems are taken. It is important for you to understand that to search in any manner other than in the record room is a form of shortcutting. Title plants, whether using physical (including lot/tract books, card systems, etc.) or computerized search systems, are ways to speed production through the elimination of some of the traditional steps. Although computer automation is used in varying degrees throughout our industry, many areas of our country, including the majority of Virginia's over 120 jurisdictions, still perform searches in the traditional manner. It is essential that you fully understand this concept to successfully complete your searching tasks. This understanding will enable you to more effectively use any title or abstract plant systems you may encounter in your career. Briefly, the procedures applicable to searching include the following (with local variations, of course.) Local variations and practices are outside the scope of this article.

1.     Identify the Subject Property.
2.     Search the Tax Records.
3.     Assemble any Maps, Plats, or Surveys Affecting the Property.
4.     Establish the Chain of Title.
5.     Search for Adverse Items or Exceptions to Title and Confirm the Chain of Ownership.
6.     Run Indices for Satellite Documents.
7.     Run the Name Search.
8.     Understand the Transaction and Coverage.
9.     Compile the Search Package for Presentation to the Examiner.

The examining procedures expand upon the searching procedures. Many of the basic areas of consideration for searching and examining are the same. When examining, your focus changes. Some areas become matters of review, while others will be expanded upon. The focus of an examiner is to:

1.     Confirm a Proper Search.
2.     Examine the Tax Records.
3.     Examine Maps, Plats, and Surveys.
4.     Examine the Chain of Title.
5.     Determine Adverse Items and Exceptions to Title.
6.     Name Searches.
7.     Understanding the Transaction.

For an examiner there are additional concerns. While every transaction contains its own peculiarities, these concerns, in general terms are:

1.     Sufficiency of Documents.
2.     Other Examining Considerations.
3.     Documenting the Examination.
4.     Summarizing the Examination.
5.     Rechecking All Work.

The examination of title, which results in taking proper exception to matters against which we are not willing to insure, is the concern of the examiner. Exceptions ambiguously or incorrectly worded can lead to claims, just as though no exception had been made.

    Assuming diverting topics continue not to present themselves, Tute will address some or all of these specific issues in future columns. Perhaps those "how-to" portions will induce you kind people to continue to read and treasure the VLTA Examiner.


                                                        Tute

 

1 Copyright © 1998 LandAmerica Financial Group, Inc. All Rights Reserved.

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