We all want to save money when we can, and one of the ways that prospective property owners are looking to save money during the purchasing process is by forgoing a comprehensive title search and settling for a two owner title search. You may be able to guess what the differences between these two searches are based on their name alone, but is a two owner title search really worth it when purchasing commercial property? In today’s blog, we take a closer look at standard title searches and two owner title searches during the due diligence process.
Standard Vs. Two Owner Title Search
Let’s take a closer look at these two types of title searches:
- Standard Title Search - A standard or comprehensive title search is what your title services team will normally provide if you hire them to research a property ahead of closing. This involves a thorough review of the title dating as far back as possible to look for the existence of potential title defects or encumbrances.
- Two Owner Title Search - A two owner title search only reviews a property’s history through the last two owners. It can be completed sooner than a standard title search, but doesn’t provide a comprehensive look at a property’s history.
Some people argue that a two owner title search is all that some prospective owners need, especially if they are dealing with a new build or a property that has had no title issues in the past. However, we find that a two owner search is rarely worth it given the small amount of money you save. Here’s why:
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Requirements - Many lenders will not provide a loan for a property unless a comprehensive title search is conducted. After all, they want to protect their investment.
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Minor Short-Term Savings - A two owner title search may be less expensive than a comprehensive title search, but it could be costly in the long run. A less thorough title search may lead to higher costs to secure title insurance, or if an issue is missed with a two owner search, you may be on the hook for unexpected title defects that arose once you closed on the property.
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Title Insurance - As we noted above, title insurance may be more expensive if you only conduct a two owner title search, or they may not opt to provide coverage unless a standard search has been conducted.
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Property Cost - Oftentimes commercial property is more expensive than residential property, meaning that there can be major financial fallout if something is missed. Given the cost of the property and what you stand to lose if a title defect eventually arises, a more comprehensive search is worth it for the peace of mind alone.
Your title services company can explain which type of search may be right for your situation. We understand that you want to save money where you can, but cutting corners with a title search can prove extremely costly, so proceed with caution. For personalized advice based on
your specific scenario, reach out to the team at Commercial Partners today at (612) 337-2470.