Benefits of incorporating title reports in listing packages

When we prepare our listing packages, we are all very diligent in obtaining a copy of the survey, drawing out the floor plans, getting the best photos, maybe even getting aerials, calculating the cap rate, checking the ceiling heights, the amps and the loads. How many of us incorporate a title report in our listing packages? Why is this so important to do when you make your package? Would you not agree that to be the best at what you do, you need to know everything about this property that you are now being hired to market? You can check the zoning and research the file at the Building Department, but how can you find out if this property has certain covenants or restrictions that would prohibit certain uses of the premises? How can you find out if there are easements over the property or perhaps easements that benefit the property, or if there is an oil or gas lease still existing on the subject property? How can you find out how many mortgages or UCC filings affect the property? Will your buyer inherit problems because the seller has judgment creditors breathing down his or her back? Suppose the seller is in bankruptcy? The bankruptcy trustee could set aside your purchase. All these things would certainly be important for you to consider when determining the highest and best use of the property, or whether it would be worth the time and effort to even start negotiations. How can you get this information? Well, you could go to the Registrar's or Clerk's Office in the county where the property is located and obtain a copy of the deed of record. After obtaining that deed of record you could chain the title back 40 or 50 years, and then run it forward and make copies of all covenants, restrictions, leases, etc. Or you could contact your title company to do this for you. For title purposes, New York State is divided into two zones: zone 1 and zone 2. Just as New York State is different from the rest of the nation, zone 1 and zone 2 have different protocol when passing title. Besides having different rates for title insurance there is a sizeable difference in the accepted practice of transferring the property. In zone 1, many of the attorneys still actually perform the abstract work in their offices. They can become examining counsel for some of the large underwriters and actually insure their own transactions. The abstract or the search is generally typed up and presented to the buyer at closing. As this is fairly time consuming, the original search, with copies of all the easements, etc. is kept by the buyer and presented to the next owner when the property is sold. At that time, the seller or the purchaser actually orders an update of the abstract from the time the present seller took title to the time that the property will be sold. A current owner search or a "stub search" as it is commonly referred to in zone 1 is then attached to the top of the "old abstract." The cost for producing these Abstracts can range in the thousands and the cost of updating the title to the date of closing is generally born by the purchaser. For this reason, the rates for title insurance in zone 1 are somewhat lower than in zone 2. What this means to us as commercial real estate professionals, is that most of what we need to know about a property is contained in this very expensive abstract that your seller or your seller's attorney probably already has. (Note: Don't take it apart when you photocopy it!) Now all you have to do to obtain the complete information on the property is to get a stub search for the time that your seller has been in title. Now how do we navigate in Zone 2? In a perfect world, the seller has a copy of his title report and/or policy and his deed readily at hand. For the most part this is not a perfect world and you will need a title company to track this down. Generally the deed of record has the name of the Title Company on it and/or a title number. This is essential in trying to locate the existing title policy. Most title companies have a cross index list where they can try and match a title number to an issuing agent. If you can locate the existing policy, then all you need to do is order a "last owner," or as they call it south of Rockland County, an "attorney search." Home free and ready for market. you are ahead because you now have an intimate knowledge of exactly what it is that you are marketing. You do not want to be confronted with a comment from left field beginning with, "Did you know that the owner is having tax problems?" You will know and can factor your knowledge into your marketing. Let the title not be a reason for holding up the closing. Avoid surprises that might hinder your transaction. Let's deal with them now and move to our marketing efforts knowing once we find our buyer, the closing is just down the road. Nan Gill is the president of Gill Abstract Corp., Goshen, N.Y. and New York, N.Y.