Update searches are a crucial component of a smooth real estate closing.
They provide a final check to ensure that no new liens, judgments, or other encumbrances have been placed on the property since the initial title search.
Think of it as a last-minute safety net, protecting you or your client’s investment and ensuring a seamless ownership transition.
What You Need to Know About Update/Bringdown Searches
Real estate transactions are complex and often take some time. Transactions can sometimes take weeks or even months to close, and a lot can happen during that time.
New liens, judgments, or other encumbrances might be filed against a property, where update searches come into play.
Most prospective buyers will opt for a Full Title Search, Current Owner Search, or Two-Owner Search during the buying process.
They’ll also get title insurance to protect this title search. Title insurance is vital, providing financial protection against potential title defects.
However, for this insurance to be adequate, it must have the most up-to-date information about the property. Update searches ensure that you know of any new claims or liens that may have arisen since the initial title search.
This is particularly important because title insurance policies typically have a gap exception, which means they don’t cover issues that arise between the date of the initial title search and the closing date.
The Timing of Update Searches
Update searches are typically conducted as close to the closing date as possible, often within a few days or even on the day of closing. This timing is crucial because it minimizes the “gap” period between the search and the actual transfer of ownership, reducing the risk of undiscovered issues.
An update search will typically look for:
- New Liens: Including tax liens, mechanic’s liens, or judgment liens.
- New Mortgages: In case the seller has taken out a new loan against the property.
- Easements: Any new rights granted to others to use the property.
- Judgments: Court decisions that could affect the property’s title.
- Bankruptcies: If the seller has filed for bankruptcy, it could complicate the sale.
- Probate Actions: In case of a recent death, that could affect ownership.
Update searches help prevent delays, reduce stress, and protect your investment by covering these areas. They’re a small but essential step in ensuring a successful real estate transaction.
The Consequences of Skipping an Update Search
Let’s say you’re purchasing a beautiful, recently renovated home. The seller recently completed a significant renovation, including a new kitchen and bathroom.
They’ve done a fantastic job; you’re eager to close and make the home your own.
You go through the real estate process, getting a title search, home inspection, and other necessary steps. The title search comes up clean, indicating no outstanding liens or judgments against the property.
However, unbeknownst to you, the seller had yet to pay the contractor for their entire work on the renovation. A few weeks after the project was completed, the disgruntled contractor filed a mechanic’s lien against the property.
This lien, a legal claim on the property to secure payment for work done, was not recorded during the initial title search.
It couldn’t be because it didn’t exist!
An update search would catch this lien. Without an update search, this lien could go unnoticed until closing day or even later.
More specifically, skipping the update search can lead to:
- Delayed Closing: If a lien or judgment is discovered at closing, the transaction may be delayed while the issue is resolved.
- Financial Loss: In some cases, the seller may be forced to sell the property at a lower price to cover the lien or judgment.
- Legal Disputes: Disputes can arise between buyers and sellers over who is responsible for resolving title issues.
- Void Contract: In extreme cases, the contract of sale may be voided if the title defects are deemed too significant.
The Cost-Benefit Analysis of Update Searches
Given these potential consequences, it’s clear that an update search is a small investment compared to the risks of skipping it. The cost of an update search is typically a fraction of the overall cost of a real estate transaction, yet it can save you from significant financial loss and legal headaches.
Moreover, update searches often take only a day or two to complete, causing minimal delay in the closing process.
This short timeframe is insignificant compared to the potential delays and complications that could arise from undiscovered title issues.
Don’t Take the Risk
An update search is a small investment compared to the potential consequences of skipping it.
By conducting this essential step, you’re protecting your investment and ensuring a smooth and successful real estate transaction, making them a crucial tool in mitigating risk and ensuring that your real estate transaction proceeds as smoothly as possible.
Whether you’re a first-time homebuyer or an experienced real estate investor, don’t underestimate the value of this final check.
Get in touch today to schedule your update search.
