A Clear Skies Primer in researching a property before buying.
Not required reading but maybe helpful and provided only as a courtesy.
Buying land does not need to be complicated. It can be simpler to buy undeveloped land where no lenders are involved than it is to buy a car. And yet, there are elements that prospective buyers should consider when buying land. The below article is meant as helpful advice but neither fully comprehensive nor as legal advice.
VERIFYING THAT TITLE IS CLEAR. Title companies offer this as a professional service. They will research the chain of title (the current Deed and the series of Deeds that preceded it) for a property to establish that the Title to the property is clearly held (cannot be contested by a another party) and has no encumbrances (money owed to an outside party and held against said parcel). Escrow agents do not typically do anything more than run the documents required for the sale as a neutral third party and leave investigating the condition of the Title to Title companies or other researchers. Title researchers will check to make sure that the people whose names are on the current Deed do indeed have the exclusive right to sell the property. They also will verify that there are no back taxes owed and that no entity holds any liens against the property. If there are no such problems the Title is said to be ‘clear’. If there are any such problems the Title is said to have a ‘cloud’. Once the Title company is sure that the Title is clear they will insure the Deed by selling the buyer Title Insurance. This is where they make their money. For expensive properties this is generally a good idea, but if there are no lenders involved it is not required and arguably not always a good idea for more modestly priced properties. Title companies will charge, typically, a minimum of $800 plus for this service for the very cheapest properties and usually much more. Title companies can also delay the sale of a property for weeks if not months.
There are other options when doing your due diligence on the property you want to buy. There’s nothing magical about the services Title researchers perform and the same ends can be accomplished through different means:
There are online companies that will, for a much more modest fee and in only a few days provide a potential buyer with a report examining the condition of the title and the presence of any liens. These companies do not provide Title Insurance. You can do an internet search for Title Search Reports to research companies that offer this service and we can recommend some as well. Services range from the less expensive and less exhaustive to the more expensive and more thorough. Prices range between $100 and $350 per title search. We always pull such a report on any property we are preparing to buy and also make copies of those reports available for free to any our prospective buyers. You can try to order an Abstract of Title (it may go by different names) from a title company but many Title companies will only do this with the sale of Title insurance. Or you can do an internet search for an independent professional Abstractor who does title research for a fee but will not sell Title insurance.
Regarding back taxes you can call the County and with a property APN number simply ask about the current status of the taxes owed. Free. A good idea since if you buy a property that has back taxes the liability transfers with ownership. I always do this and will not sell a property with back taxes without making that clear to any prospective buyer.
You can also visit the County Recorder offices and do your own research. All counties make available a data base that is typically on computer or microfilm that you can scroll through. You will need the names of the people on the current title and you can easily do your own chain of title search for free. You can research the chain of title going back many, many decades – in theory the records should trace back to the origins of the county or state. If you do, pay attention to any language describing any strictures or covenants that may limit rights of use (For example: quite often mineral rights can remain restricted by an earlier Title holder or by some legislation) or any easements (rights given to utility companies and neighbors on adjacent properties to cross defined portions of a property on a limited, defined basis if deemed essential for the other party). Such language is not uncommon and may exist on an earlier Deed and have only a partial reference on the current Deed (for example: “Subject to existing easements of record”). Don’t be surprised if you uncover errors that were made in the past. Sometimes you may even find a break in the chain of title where there is apparently a deed missing. Not good, but it can happen.
Be nice to the workers behind the counter and they can be very helpful. That said, they are usually busy and quite sensibly expect people like us to be prepared to do our own work. They are prohibited from providing legal advice and may even be prohibited from providing advice on completing forms or conducting certain processes. Copies of such documents can be printed out and certified at the desk for a nominal fee. With some counties all this research can be done online.
Clear Skies Properties makes use of a company called Title Mind that will provide everything an escrow company and title company will do except for providing Title Insurance. Fees are considerably lower – $550 for even expensive properties- and can finish the project in days – not weeks or months.
Liens are a matter of Public record and can be discovered by research with the same county resources. There are two types of liens that can be placed against a property. A voluntary lien is a lien the homeowner agrees to — like a mortgage. An involuntary lien is typically placed on a property due to unpaid obligations like a tax bill or a home improvement invoice, sometimes called a mechanic’s lien. When the lien on a property is paid off, the creditor has been satisfied. Their primary objective was to get paid, and once that is done, removing the lien may or may not be on their radar. If the lien holder has not released a lien that has been satisfied you may need to secure a notarized lien release from them. Since Clear Skies Properties deals only with vacant undeveloped properties such liens, apart from property taxes, are almost never applicable, but not impossible. Of course, such research is a standard part of all our transactions.
Another bit of research to be done is regarding any existing Home Owners Association or Property Owners Association that a property is obligated to. If there is, you will need to get permission from the property owner to make a demand letter to the HOA or POA verifying whether or not there are any existing back dues you may be liable for – usually such debts do not transfer.
One last thing on this point: It is not uncommon to find errors on deeds. Sometimes the wrong APN will be written down or some important information might get dropped in the writing of a new Deed. It shouldn’t happen but we’ve seen it. The important thing is that the Legal Description must be correct and that is the only information by which a property can be securely identified in a Deed. From one Deed to the next the Legal Description should remain exactly the same unless it has been changed by legal action and documented in the Deed. If information in a legal description is somehow dropped in the formulation of a new Deed the information from the older Deed remains in standing unless that change is specifically addressed.
How common are problems? Errors are not uncommon, but discovering a third party who has legal grounds to contest ownership or who holds a lien against a parcel is, in my experience, uncommon. The exception to this is with situation where the current or preceding Deed specifically lists a third party who co-owns. But those situations are almost always easily discoverable with cursory searches.
PROPERTY BOUNDARIES: There is only ever one certain and legally binding way to determine property boundaries and that is with the services of a licensed and state recognized Surveyor. Prices range on their services but it is typically in the couple to few thousands of dollars. Surveyors will stake boundary corners with any number of markers from rebar to metal or wood posts to natural features. You can take advantage of this by using a plat map (that Clear Skies provides and can be gotten elsewhere as well), finding existing nearby markers and then precisely measuring off your own boundary markers. You should be comfortable with your boundary lines before building anywhere close to them. Don’t count on GPS coordinates being correct; some county GPS numbers are good and some others are not. You can, however, get a very good sense of your property lines by studying plat maps, using reliable measuring tools and just doing some careful on site homework. Experience and talking to neighbors is also helpful.
FLOOD, FIRE, EARTHQUAKE AND OTHER CONCERNS: There are many online services for checking for flood, fire and other concerns. You can check with local state or county web sites or the FEMA web site (https://msc.fema.gov/portal/search) to see if the property you are interested in has any special concerns. Clear Skies Properties will also freely make available Property Reports for any property we are selling and these reports contain this type of information and more. We most commonly use property reports by TitlePro 247 which is a Black Knight Corp.
SOIL CONDITIONS: Clear Skies Properties does not perform any type of soil analysis including percolation tests and does not pay for them. Professional Percolation tests (tests to verify that standard septic systems will be feasible) are costly (perhaps $1500) and our discounted prices do not allow us to absorb such costs. In truth, you can conduct your own ‘mini’ perc tests on a parcel. Basically, it involves digging a hole yourself and filling it with 10-15 inches of water and timing how long it takes to drain down – more than 15 minutes per inch is a problem. While this is not as definitive as what a professional crew could provide with a back hoe, it is certainly worth considering. Also, keep the following tips in mind:
- Very steep properties (over 30 degrees) and properties close to bodies of water or water pumping stations may be problematic for a standard septic system.
- Ordinary or sandy soil generally works well for septic systems, but if the soil has a high clay content it may prohibit the drainage needed for a standard septic system.
- If a parcel is in the middle of an area where other houses are built it is a good sign as the soil type on those properties must make septic systems feasible and dramatic changes in soil qualities from one lot to the next are unlikely.
- Septic systems cannot be close (less than sixty feet) from a pumping station.
- If an area does not have the drainage needed for a standard septic system there are many other options that, while more expensive, may still prove to be a value for an already discounted property.
- You can call a septic service company in the area near your property and ask them directly what they think about the feasibility of septic systems in that area. They may be coy about a definitive verdict, but they may offer helpful, if general, information.
- Clear Skies will allow, by arrangement, any prospective buyer to perform a ‘mini’ perc test on any parcel we are selling.
Since at Clear Skies Properties we sell our land for well below what comparable properties sell for we cannot absorb any of the additional above costs and those costs would need be added to the cost of the sale. Adding such services is always option we can add.
SUMMARY: Needless to say, we do not want to be exposed to risks in buying land any more than anyone else and so we do our own due diligence before buying anything we intend to sell. Still, only you can decide what your comfort level will require in buying a property from us or anyone else. What we can assure any buyer of is that we will not withhold important information or mislead prospective buyers in any way. Ever. We will work with you to ensure you are comfortable with any purchase from us.