World on Paper

We live in a world on paper. Even though digitization encroaches with its bits and pixels, the ownership of real property is still recorded on paper marked with wet ink. The oldest of technologies—wet signatures—still define and enshrine ownership status even in the AI era. This paper document, the deed, represents the legal concept of title. At a fundamental level, a title is simply a bundle of rights associated with the ownership of a piece of property. In the United States, there are hundreds of millions of parcels of property, some with histories going back generations, and there are millions of real estate transactions where these parcels change hands every year. So, what, or who, keeps track of all this?

If you guessed the government, you're partially correct. County clerks diligently record these deeds, filing them into the public record. Most counties even provide online access to these public records. For example, if you live where we do, in the Austin, TX area, you can search for your property on the Travis County county clerk's online database. In smaller counties, you'll often need to visit your county clerk's office in person to access the records.

In a perfect world, the county clerk is all we'd need. Alas, county clerks are mere mortals, and sometimes make mistakes. Simple errors like typos may arise that need to be reviewed and remedied. These typos can derail a transaction if not caught and corrected.

And there are many other complications that arise with ownership. Liens and other encumbrances can be claimed against a property for a debt owed to a third party. These entanglements muddy the waters of ownership.

Common title issues include liens placed upon a property for failure to pay a mortgage or a tax bill. Strange issues can arise, too, like long-lost heirs of a previous owner emerging to claim ownership of a property according to their ancestor's improperly probated will. More insidious, fraud is shockingly common in real estate transactions. Real estate fraud comes in several flavors including financial wire fraud, and forgery in which buyers discover the person who sold them a property forged the real owner's signature on the deed.

When purchasing real estate, buyers must be certain the title is clear. Otherwise, they risk losing ownership of their home, which could be financially devastating. But as we've seen, unexpected situations can arise that affect title, like unrecorded liens, prodigal heirs, and fraud, so how can buyers and lenders be sure?

Enter title insurance. Title insurance protects owners against mistakes or hidden risks associated with their title. Mortgage lenders require title insurance to finance a home. In some states, title insurance rates are regulated, but overall rates typically range between 0.1% and 2% of a home's purchase price. So if you guessed insurance companies are the ones keeping track of titles, you'd also be partially correct.

Producing a clear title that can be insured requires a title search, either by a title agent, a title attorney, or both. It varies from state to state, and varies with the complexity of the parcel. Title companies can be large with national coverage, like First American Title and Fidelity National Title, or they can be smaller and provide hyper-local coverage. Either way, if you guessed title companies or lawyers, you'd also be partially correct.

So, are title companies and title attorney's simply searching the county clerk's online database, or visiting their office from time to time to pull the records they need? A little of both, and a little of neither. A title plant, also known as an abstract plant, is responsible for curating the databases of property records and their transaction histories, and making these databases available for transactions.

Title plants also keep track of many other types of records that may affect title, including mortgages, plat maps, divorce actions, and probate records. Title plants are different from county clerk records because they come with a stronger guarantee that the information is current, correct, and complete. In Texas and most other states, title plants are regulated, and a title company must either own or lease a title plant to operate. Though these plants are the most esoteric part of the whole process, if you guessed title plants, you'd also be correct.

As you can see, in our World on Paper, property ownership is tracked by a mixture of private and public entities. County clerks, title insurers, title reviewers, title lawyers, title agents, and title plant operators all have a hand in creating the rich history of property ownership in the United States. If you have questions about this or other topics associated with ownership, transactions and real estate, let us know!