Buying property in North Carolina?
Whether you’re dealing with residential or commercial property, it’s crucial to know the details of title searches, attorney involvement, and related procedures.
This guide equips you with the essential knowledge to navigate a smooth and secure property title search in the Tar Heel State. Let’s ensure your real estate journey starts on solid ground!
State Statute Requirements for Title Searches
Whether investing in a residential or commercial property, getting a title search is a good idea. It helps uncover the property’s ownership history and potential issues like liens, easements, unpaid taxes, and any encumbrances that could affect your rights as the new owner.
You don’t want to buy a property only to later get into a border dispute with a neighbor, find out you owe tens of thousands of dollars for an old building project that wasn’t settled, or have an unknown heir pop up and claim it’s their building.
This thorough investigation ensures you understand what you’re buying into, preventing surprises and legal disputes.
However, while a title search is always a good idea, some states have specific rules on how and what they must include. North Carolina is one of these states.
Here’s what’s required:
- Residential Properties
A 30-year title search is mandatory. This means the search will review all recorded documents related to the property’s title for the last three decades.
- Commercial Properties
These also require a 30-year search, but depending on circumstances, a more extended search might be necessary. Commercial properties often have a more varied history of ownership and usage, making a more extended search sometimes essential to uncover potential legal or financial risks.
- Judgment Searches:
Residential and commercial properties require a 10-year search for North Carolina judgments (which focuses on uncovering any decisions from state courts) and a 20-year search for federal judgments. Federal judgments can include tax liens imposed by the IRS or other federal entities, which might impact the property’s clear title.
Mandatory Attorney Involvement
North Carolina law mandates significant attorney involvement in property transactions. Why? It’s designed to ensure that all aspects of the transaction are legally sound and adhere to state laws. But crucially, it helps safeguard both buyers and sellers from potential issues.
Attorneys have a deeper understanding of complex property law and can identify potential problems a buyer or seller might miss. This protects everyone involved by catching any red flags early on, preventing costly legal battles.
Here are the primary ways attorneys are involved:
- Certification of Title
A licensed North Carolina attorney who isn’t an employee or agent of the title company must certify the title. This is crucial before a title insurance policy can be issued, as stated in North Carolina General Statute section 58-26.1.
- Document Preparation
A North Carolina attorney must prepare all legal documents related to the transaction, such as deeds and mortgages (NCGS § 84-2.1).
- Real Estate Closings
Non-attorneys may perform limited services like witnessing documents and handling funds, but a licensed attorney must supervise these activities. This includes approving fund disbursement and final title certification.
North Carolina Certificate of Release of Mortgage
Attorneys can also handle the “satisfaction” of mortgages. This is where a “satisfaction agent” (often a North Carolina attorney) finalizes paying off your mortgage.
They file a North Carolina Certificate of Release of Mortgage, officially notifying the lender and removing their claim on the property. This ensures your title is clear and avoids any confusion about ownership after the loan is paid in full.
Free Trader Agreement
This is another area where North Carolina attorneys, or those well-versed in law, are involved. Divorce can be complicated, especially when it comes to buying property. Free Trade Agreements help when one spouse wants to buy a new home while the divorce is ongoing.
This agreement allows one spouse to give up any potential claim to the property purchased by the other. The buying spouse becomes the sole owner of the property, and the ongoing divorce proceedings won’t affect their ownership.
This can benefit both parties by providing clarity and security for the buying spouse, who can now own the property and decide independently, like securing financing.
Financial Regulations and Taxes
Notably, North Carolina does not impose a mortgage tax, which can simplify the financial aspects of buying property. However, there are still some other regulations you must be aware of when purchasing a property.
Firstly, the state requires a licensed North Carolina underwriter to sign off on loan policies. This ensures qualified professionals are involved in the financial aspect of the transaction.
Secondly, the North Carolina Good Funds Settlement Act protects the integrity of real estate loan transactions.
It outlines specific duties for settlement agents, who handle the disbursement and recording of funds. This includes ensuring funds are “collected” before disbursement and recording all necessary documents, such as deeds and mortgages.
Finally, since 2012, settlement agents in North Carolina must hold loan funds in interest-bearing accounts. This protects your money and ensures it’s readily available for the closing.
Conditions for a Valid Title Insurance Policy
Certain “standard exceptions” typically fall outside the scope of coverage and some requirements you’ll need to fulfil to ensure a smooth policy issuance.
Here’s what you need to know:
- Notification
Transparency is critical. The insurance company needs written notification about anyone not mentioned in the title commitment who will acquire an interest in the property (think co-owners or beneficiaries).
- Payments
You are responsible for fulfilling your financial obligations. This includes paying the agreed purchase price for the property, the insurance premiums, and any related fees.
- Document Handling
Ensure all documents that affect the property’s title are in order. This means they must be appropriately authorized, signed, delivered, and recorded according to legal requirements.
Let’s Talk
Whether buying your first home or dealing with complex commercial properties, understanding these aspects of North Carolina real estate law is essential. These regulations ensure the legal transfer of property and help protect all parties involved.
Ready to get started?
At Pippin, we have extensive experience in title searches and can guide you smoothly through every step of the process.
