How a search report helps a buyer of property
A search report traces the history of a property - who was the original owner of the property and how it has moved hands over a period of time before reaching the present seller. This is an important part of a housing loan process. A search report is usually prepared by an advocate, who after visiting the registrar's office and inspecting the property documents, issues a title certificate.
A title certificate states whether the property is unencumbered and has a clear marketable title. This search report and title certificate can be obtained from one's own advocate or if the search has already been conducted by the current owner, one can have his advocate inspect the report to ascertain the title of the property. One may do a survey of the title of the property himself also by visiting the office of the registrar.
The report traces any charges or encumbrances created on the property and their present status - whether the charges have been met and the property has been released, or if there are some charges pending still. This search on the title of a property is taken for a period of the past 30 years. It is mandatory for a developer to annex a copy of the report in the 'agreement to sell' with the intended purchaser. This document will state if there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.
In the same way, a bank is also assured of the tile of the property. Banks usually do not finance an encumbered property or one under legal dispute because it reduces its security and increases its risk exposure.
In order to avail a housing loan, one of the preconditions is that the title of the property should be clear and marketable. A clear and marketable title means the seller should be genuine and the actual owner of the property. Further, the property should not be under any dispute or litigation. A search report traces this history of a property.
In many cases, the lending bank has its own advocate who specialises in this exercise. Usually, the cost is nominal and is built-up in the processing and administration charges of the bank for sanctioning and disbursing of the loan. Others charge a nominal fee for this exercise.
The report acts as a security for the purchase of a property. The report gives comfort to the purchaser that the title of the property he is planning to purchase is good and he will not face any problems at a later stage due to some pre-existing charges or encumbrance, or legal dispute on the property. A search report gives a buyer the confidence that he is undertaking a transaction with a genuine party.
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