Anatomy of a real estate title search
|July 6, 2005|
Industry under scrutiny in wake of nationwide investigations
By Janis Mara
Karen Applebee of Napa Land Title has 27 years' experience in the title and escrow industry. When the jobs are simple, she can pop out a title search in 15 or 20 minutes, producing four or five reports in one day, she said.
However, "sometimes it can take days," said Applebee, a title officer whose company is in Napa Valley, a California area known for its wineries. "We've had to go back to the land grants from when Mexico occupied California."
Title insurance companies are under intense scrutiny nationwide in the wake of Colorado's investigation of major title insurers for alleged kickbacks. Though an intense light has flooded the industry, still, little is known about the actual process of a title search. Applebee, a title officer at 27-year-old Napa Land Title, allowed Inman News to observe her on a typical day to shed some light on the process.
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>>More It's obvious that Applebee is a pro as she wrangles 2-foot-by-1-1/2-foot maps from a huge file cabinet with 3-inch-tall, 2-foot-wide drawers, reads the cryptic codes on the maps, and whips the awkward, huge sheets of paper through the photocopier.
"There's no school for title search officers like there is for engineers," Applebee said. "I learned on the job." She started as a legal secretary, though not in the escrow area. After a move within California, she registered with a personnel agency that sent her to a title company in 1970. "I've been in and out of the field, but once it gets in your blood, it never gets out," she said.
The speed with which the title officer can produce title reports seems to suggest that they're not that expensive to generate. Such reports can cost consumers in the thousands of dollars. This seems to add fuel to the fire of the ongoing investigations, which accuse title insurers of charging consumers inflated prices that involve illegal referral fees.
Not necessarily, Applebee said. It's expensive, she said, to subscribe to the various companies offering data on properties in a given county that make the search quicker. Napa Land Title subscribes to two databases, the Data Trace system and MetroScan, as well as the county assessor's tax collector database and the county recorder's database.
Though the title insurance process varies from state to state, at Napa Land Title, the process is set in motion when an order comes in, Applebee said.
The order generally comes from real estate agents, according to David Westcott, the attorney who owns 27-year-old Napa Land Title. There's also a refinance market with mortgage brokers "who like to work with us," he said. Every once in a while the company gets a for-sale-by-owner walk-up client, Westcott said.
Each company can usually only search its own county, Applebee said. "We have to have the records here (in the office) on microfilm and computer."
Though most of the records are available online, the company has hardcopy records from the 1950s and 1960s in the office, she said.
After the order comes in, the next step is to search the records. Applebee starts in the MetroScan database.
The system displays the owner's name, address, sales and loan information, how much the current owner paid for it, the legal description and property characteristics. Applebee prints out the information and adds it to the file on the property, along with a map provided by MetroScan.
The next step is visiting the county assessor's tax collector base. "This gives us their taxes, whether they're paid and assessed value. It also tells us if any supplemental taxes were paid. This would happen if, for example, you added a pool," Applebee said.
Next, Applebee hits the county recorder's Web site and runs the current homeowner's name to make sure there are no federal, state or county personal liens on the property.
"Let's say you refused to pay an auto mechanic who worked on my car, and the mechanic got a judgment against you in small claims court. That judgment is good for 10 years and you have to pay it," said Applebee. "It takes precedence over a new loan and Bank of America or whatever lender won't take it over."
The fifth step is checking the Data Trace system, another database the company pays for. This shows every document that has been recorded on the property – mortgages, second mortgages, liens and easements on the property.
Now, Applebee pulls the subdivision map – the huge maps that live in flat files in the office. She looks at the map to see if there are easements, such as allowing telephone poles or the like on the property.
"The dotted line on one area shows a PG&E easement – see?" Applebee points out. "That's a storm drain."
She photocopies the part of the map applying to this property and puts the copy in the file.
Now, Applebee writes up the results of her labors. Another employee of the firm will do the data entry.
"Now we have the preliminary title report," Applebee said. "When the sale closes, we'll issue a title policy."
Because this particular job involved an existing lot in a subdivision, it was easy, Applebee said. Other pieces of property can be much more demanding.
"If you're doing a piece of property in the mountains or a vineyard, it isn't subdivided. The lots aren't perfectly laid out and are in various sizes and you have to read the legal description to make sure you're looking at the right place." This and other reasons make it more complicated, Applebee said.
Complicated title searches can take easily up to two days, she said.
Napa Land, owned by David Westcott, is what is called an underwritten title company. Title officers like Applebee do title searches and either Stewart Title or LandAmerica actually issue the policy.
David Westcott, the owner of Napa Land Title, estimated it costs his company "several hundreds of dollars" in overhead to produce a title search.
"The hard part is not in calculating employee time," he said. "We get a copy of every document recorded at the recorder's office; we pay for that and we arrange it. We invest a huge amount of overhead just to search an order.
"Several hundred dollars per title search would be as close as I can say to the cost of the overhead to issue a preliminary report," the attorney said.
Customers are charged according to the dollar amount of the policy, he said.
"The policy is typically the price they are paying for the house and the price for the policy is according to the value of the house."
According to Westcott, "An example would be, for a $500,000 house, a standard owner's policy might be something like $1,300. That would be typical."
Westcott said his 27-year-old company, which handled the title work for Robert Mondavi Winery when it sold out to Constellation Brands, also offers discounts for orders opened online.
"If you go to the Web site at http://www.napaland.com/, click on a button that said, 'Open an order' and fill in your information, you get a 10 percent discount," Westcott said. "The customer can do that or the real estate agent can do that."
Copyright 2005 Inman News