Home buying process
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Titles and deeds in real estate
- [Voiceover] Let's say that this is me in this column over here, and that this is you in that column over there. And let's say that you are in possession of a nice juicy, of a nice juicy apple right over here. Let me draw this apple properly, let me make the leaf in green. So you are in possession of this apple, and I'm hungry, I would like to have an apple. And I just assume while you posses this apple, I assume that you own it, so I go up to you and say, "Hey, can I buy this apple from you?" And you say, "Okay, yeah. I don't really need it, "I'll sell it to you for a dollar." And so I give you a dollar, I give you one dollar, and then you give me the apple. Then you give me the apple, so now I have it, so now I have the apple. Somehow the apple got smooshed a little bit in the transaction. So now I have, I have, now I have the apple. Now when I did that transaction, there were some assumptions that were made, I assumed that possession of the apple was equivalent to ownership of the apple. I assumed, whoops, I assumed possession is equal to ownership. And you might be thinking, "Wait, wait, "under what cases would possession "not be equal to ownership?" Well what if you just picked this apple from your neighbors garden? The rightful owner of that apple is your neighbor, but you just picked it, maybe you swiped this from the corner store. Maybe you found this on a bench and you said, "Okay, well it doesn't seem "anyone else is claiming it. "So I'm just going to claim this apple." But maybe someone else had left it on the bench, and then they come back an hour later, said, "What happened to my apple? "I'm the owner of that apple." So you see that even in the case of an apple, possession might not be equal to ownership. So these two things might not be equivalent. But for something as small as an apple as, I guess you could say financially not as important, something that's you know has a market value of a dollar. It might be too much trouble to kind of do a background check on the apple to see do a forensic analysis to see who is guarding the apple came from or to see is someone else had legal right, legal title to the apple. And so for things like apples, we tend to just transact just assuming that possession equals ownership. Now let's take, let's up the stakes a little bit. Instead of an apple, let's say we're talking about a house. So let's say that you are in possession of this nice yellow house. So let me draw, we definitely want to visualize what a nice yellow house would look like. It's got some windows here, so and there's some nice gardening. There's, so you, you are in possession of this nice house. So what does possession of the house means? Well, it means you're living in it, you have the keys to the house, your station wagon is in the driveway. Your stuff is in the closet, your furniture. You have pictures of you and your family on the wall. So you seem to be in possession of this house. And you stick a for sale sign out on. So, for sale. So you put a for sale sign outside of this house, and I'm new to town, and I need a place for me and my family to live. And so I say, "Hey, you know, "I'd like to buy that house. "How much is it?" And you say, "It's $100,000." You say, "Okay, it seems like a reasonably "good deal compared to other houses "in this neighborhood. "I want to buy it." And you say, "Great." So I walk up to you, I write a check for maybe I even have cash for a $100,000. So a little bit more serious transaction than the apple transaction. And then in exchange you give me the keys to the house. So now I have the keys to the house. I'll draw some keys here. So keys to the house. And you say, "Give me an hour." And you pack up all of your stuff, take your pictures off the wall, put them in your station wagon, and you leave. And you say, "Okay well, I guess I'm just "going to move in to the house." Now, you probably are thinking, "Something is suspicious here. "Something is, makes us feel a little less comfortable "doing this transaction than this "transaction over here." Because this house, just because the person happen to be in it and had the keys to it, didn't mean that they owned the house. So once again, possession does not necessarily equal ownership. We can think of a lot of scenarios for a house where possession does not equal ownership. They might have been renting the house, they might have been renting. They might have been guest in the house. And maybe the owners, the real owners were off to work and their faces were in the pictures just because they were the owner's brother-in-law or something. So maybe they were guest in the house. Maybe they were, maybe they just saw a vacant house, maybe this is someone else's vacation house, and said, "Hey you know what, "I know these people don't show up "during the summer, so I'm just going to go there "change the locks, have the keys, "and I'm going to pretend like I live there. "And then I'm going to try and find somebody "new to town and I'm going to sell them the house "for a $100,000." And if you think all of these things are kind of crazy scenarios, they've all happened. Because as you can imagine there's some people for whom who have who are I guess a little bit less scrupulous, who's ethics are questionable, who could be very tempted by this. So you could imagine for, when you're talking about big dollar figures, people have tried some fairly major scams. So how do you, and you know, and once again, just in the case of the apple, maybe someone left it on the bench, and someone thought that it was their, you know you thought it was your apple now that you found it. There could be, it doesn't have to be just scamming, it could be, I thought I inherited this house, but then some other relatives shows up, who is closer to the previous owner of the house, and said, "No, no, wait, wait, wait. "You can give that house to the son-in-law. "I am his younger brother or I am his long lost child." Or whatever else it might be. So you might have thought that you own the house, but there might have been some other claim on it. And maybe you bought the house out right or you thought you bought it, but maybe the previous owner had you know was in a dispute with their brother or their sister over the house. So there could be other claims on it. And so the way that, the way in modern society is that we deal with this, where we see who has ownership rights or another ways of thinking about it, who has title? So this is an important word. Who has title? Or I guess you could say proof of title. When I talk about title, this is ownership rights, we're talking about real, right to live in the house, it's a right to do what you, you know, garden around the house, has the right to modify the house. So the question of who has title or evidence of title, evidence of title, happens through legal documents. Evidence of title. And these legal documents are called deeds. So let me write them. So the legal type. These legal documents are called deeds. And deeds, so when I, so if I wanted to buy this house from you, you would, we would get an attorney, and then we would draft a deed that transfers, that transfers the property from you to me. But you're saying, "Wait, wait, wait, "that still doesn't you know prove to me "that the house is all good." And then that's why I would do a title search on it. So there's actually companies that do title searches, and they're going to go to the public records, to the city or county records, and they're going to see, "Hey, what are all "the deeds that have been filed with the city?" And whenever there's a deed, if things have done properly, it needs to be made of public record, it needs to be filed with the city or county. And so when you do a title search. So when you do, let's do in a different color. When you do a title search, whoever is doing the title search will look at the public records, and they'll look at all the previous deeds. They'll look at the deed that from the previous owner of the house to you, they'll look at the deed from the previous owner even before that, and they'll make sure that all of the the titles, the title transfer has been cleaned, that there hasn't been any weird claims on the house, that there haven't been liens on the house. We'll talk more about what a lien is. A lien is essentially a claim on the house, maybe three owners ago someone didn't pay property taxes, and the city is still saying, "Hey, whoever owns this house, owns us a $1000." Maybe four owners ago there was someone who did an improvement to the house, and said, "Hey, that owner never paid me "for the new driveway. "I have a lien on this house. "Whoever is benefiting from this driveway, "who owns this house, they still own me money "before I were to remove that lien." So the way that we do it in a modern society is, Okay, you say you're selling this house, but before I actually give you the money, I'm going to do a title search, I'm going to make sure that there aren't any other claims, I want to make sure that you are the real owner of the property. And only then will money be transferred.