Abstracts, Title Insurance, and Some of the People Behind Your Real Estate Closing

Someone close to me recently said, "Kara, you're not an attorney."

You know what? They are absolutely correct. I am not an attorney. I am an auctioneer and a real estate broker licensed in the state of Illinois. Should I know the law as it applies to those areas? Yes. Do I know every code, rule, and statute that applies to my licenses off the top of my head? No. But I do have a copy of it at the office. I really do. Unless someone did something with it. Honestly, I look it up online when I need to review something specific. That's the cool thing about the internet — you can look things up.

Although, apparently, that gets you a "you're not an attorney." And honestly, they're right. Which is exactly why knowing where everyone fits into a transaction matters.

The Attorney and the Title Company And let's talk about why they don't always want the same thing — even when you'd think they would.

An attorney's job is to protect their client, within the letter of the law. A title company's job is to help ensure the title is legally insurable and transferable.

Shouldn't those be the same thing? Not necessarily. And that's where it gets interesting.

Here's a real-world example. A buyer wants to purchase a piece of real estate and put it into a trust, an LLC, or a corporation. Who is responsible for that contract?

What if they haven't actually formed that entity yet?

The title company wants the contract written in the entity's name — because that keeps the chain of title clean and clear. The attorney for the buyer, on the other hand, should want the contract in the name of someone who is legally responsible for it. Why? Because if the entity listed on the contract doesn't actually exist yet, what happens if something goes wrong? What can you do when the party responsible for the contract isn't a real thing?

The title company wants the entity on the contract so there's no confusion in the chain. The attorney wants a responsible party on the contract so there's legal recourse if needed. And that responsible party should be either a person — someone with personal assets on the line — or an established entity that actually has assets, a history, and someone who actually has the authority to speak for it. Both make sense. Both are doing their job. They just aren't always looking at the same thing.

So What Is the Chain of Title?

The chain of title is a clear, documented history of who has owned a property — all the way back to the very beginning. Every owner, every transfer, every attachment, every release.

Here in Illinois, we use title insurance policies to insure the real property. Before that policy is issued, a title examiner reviews the records to verify that the person selling the real property actually owns it and has the right to sell it. We used to use abstracts — an actual document (sometimes a whole book) that recorded everything that had ever been attached to or released from the property: loans, liens, easements, and anything else ever recorded against it or for it. The abstractor compiled those records, and a title examiner would review them to give an opinion on the condition of the title.

Title insurance replaced the need to have the abstract compiled in one document to close a deal. Instead of maintaining and updating that big book, a title insurance policy insures that the current owner has the legal ability to sell the property free and clear of encumbrances — or at minimum, discloses what encumbrances exist that the new owner can live with.

A good example of a livable encumbrance? An easement that allows the water and sewer lines to run across or through the property. They were there before the new owner arrived and they'll be there long after. The new owner can live with that.

What happens if the title company gets something wrong? There is a claims process — and it is not simple. The title company has professionals who handle those situations, and it is between the affected parties and the title company to work through. What I will say is they don't love it when something goes wrong. And honestly, it doesn't happen often — because they are very careful.

How Far Back Does It Go?

In most cases, around 50 years — give or take ten years. That's the standard search period.

But depending on the property? Sometimes they have to go back 100 years. And sometimes all the way back to when the land was originally granted by the state — we are talking about a country that is celebrating 250 years of existence this year, so yes, some of that history runs deep.

And yes, if there's an abstract? It already goes back that far. That's kind of the point.

Some states still require an abstract. This isn't necessarily a bad thing — and it's not necessarily a good thing either. Here's the case for the abstract: you have a single document that tells you the who, what, when, where, why, and how of a property's history. It makes things easier to search and easier to follow.

I heard a story — and I honestly don't know if it's true, but it seems entirely plausible — about a court case where two people each had a title insurance policy saying they were the legal owner of the same piece of property. Only one of them had the abstract. The abstract was able to give a much clearer picture of the actual history of that title. Case made.

Some abstracts are genuinely fascinating to read. Some are about as exciting as watching paint dry. But they all tell a story.

Now, here's where it gets complicated for the states that still require abstracts. If you don't have the abstract, the abstract company has to rebuild it. I've heard that some states have a rule that it must be completed within six to eight weeks — but because there are so many people who need an abstract and so few abstract companies to do the work, it can take months. Sometimes six months. Sometimes eight months. Sometimes a year just to rebuild one.

That is exactly what makes a title insurance policy easier. A title policy can be built in as little as two weeks, sometimes a month — but longer is not unheard of. Why the difference? The amount of history the title examiner has to cover. Are they going back 50-ish years, or are they going back 250 years, give or take? And it's not just the years — it's everything that has been recorded along the way, and unfortunately sometimes what should have been recorded but wasn't. A mortgage release that should have been filed 75 years ago and never was? That's the title examiner's problem to unravel now. That's not a small distinction.

Personally, I believe you should keep your abstract if you have one — and pass it on with the property when you sell. It's history. It's the story of that piece of ground. Think of it this way: an abstract is metaphorically attached to the real property. It belongs with the property, no matter who owns it. A title policy, in a sense, rips the abstract away — so the abstract isn't necessarily needed anymore. But it is still good to have.

Here in Illinois, we have title insurance, and that takes the pressure off. If you are in a state that handles title differently — whether that means title insurance is used alongside an abstract, or the abstract is the only option — the rules and timelines of your state matter more than you might realize. Know what your state requires before you find yourself waiting. I know an auctioneer in an abstract-only state who has to wait until the abstract is rebuilt before they can take a piece of real property to auction. And honestly, that's the right call. You should wait to sell until after it has been rebuilt. The last thing anyone needs is to get to closing and have the abstract be the reason everything falls apart. It's the waiting — sometimes six months, eight months, even a year — that is the hard part.

Who Should Be on the Contract? — whether that is a trust, an LLC, or a corporation — on a purchase contract instead of a real, live, responsible human being?

The title company is thinking ahead to the deed. When the property closes, the deed will read "Seller conveys to XYZ LLC" — and that's what gets recorded and shows up in the chain of title. If the contract said "John Smith" but the deed says "XYZ LLC," the title company has to account for that transfer somewhere. It creates an extra step and extra questions. So from their perspective, putting the entity on the contract from the beginning is cleaner.

But here's what the title company isn't necessarily worried about — and what the attorney absolutely is: does that entity actually have anything to go after if something goes wrong?

A person has personal assets. A house, a car, a bank account, wages. If a buyer defaults or a dispute comes up, there's somewhere to go. A brand new LLC formed last Tuesday to purchase this one piece of property? It may have nothing in it. No assets, no bank account, no history. You can sue that LLC all day long and if there's nothing inside it, you've won nothing.

And that's the other thing to understand about an LLC — the entire point of one is to shield the individual from personal liability. That shield protects the buyer from business risk, yes. But it also protects the buyer from you if the deal goes sideways.

There's also the question of authority and assignment. If John Smith signs on behalf of XYZ LLC, does he actually have the authority to bind that entity? Is there an operating agreement that says so? And has he assigned the contract to someone else — another member, another entity — without telling anyone? Contracts can be assigned unless the contract — or state law — says otherwise. Title companies are often not fans of assignments for exactly this reason: it muddies the water on who is truly responsible and who is actually receiving the property. So you may not even know who you are truly dealing with.

Both the attorney and the title company are trying to protect against the same underlying problem from different angles. The attorney wants a responsible human being or established entity on the hook. The title company wants a legally existing entity that can actually receive a deed. The cleanest path most experienced practitioners use is to step back, examine the deal, and ask what will work best for everyone involved — the buyer, the seller, the title company, and yes, the attorney. Every deal is different. But always consult your attorney and title examiner. You could also get the consultation of your spouse, first born, or friend.

Still Learning After All These Years — and I've been doing real estate auctions since 2007, so yes, I've had some time to think about it:

As someone who sells real estate, my job is to understand both sides. The attorney's side. The title company's side. My job is to respect what each of them is trying to accomplish and help make their jobs easier. I am not the expert on their areas. But I'd better understand enough to navigate between them.

Am I still learning? Absolutely. Every transaction teaches me something.

And no — I am definitely not an attorney, an abstractor, nor a title examiner. That's why we have them. My job is to stay out of their way, help them when asked, and do my job — which is everything from walking the property and taking pictures, to writing the marketing, running the auction, and seeing it through to closing.

Happy Bidding!
Kara C. Belcher-Miller

P.S. Between you and me — they don't ask me much.