We know that in the country recording laws provide for the record of transactions relating to real estate, otherwise innocent purchasers and encumbrancers are not affected. Consequently a purchaser of real estate must look to the record to find out whether the title is good. This record includes the patents from the United States government and all deeds, wills, administrations of estates, judgments which create liens, mortgages and trust deeds, suits in respect to the title, and in general any public record that in any way affects the title. Now it becomes a difficult task for the purchaser or his attorney to look through these records and be sure he has missed nothing, especially in large cities or in any community where real estate transactions are of frequent occurrence. Accordingly abstracts are made up by abstracters whereby all transactions affecting the title in question are briefly noted. This abstract is a brief resume of every transaction affecting the title so that one by going through the abstract can follow the history of the title so far as it appears of record. In many communities an owner cannot sell his land unless he furnishes an abstract. This abstract is given to successive purchasers and is brought down to date by each seller.
There are persons and companies who make a business of furnishing abstracts to real estate.
In many communities especially large cities it becomes a matter of great difficulty to discover everything that is of record, the records being very voluminous. Consequently abstract companies are formed which have experienced abstracters and these companies keep a record of all transactions and are able to furnish on short notice an abstract of title concerning any piece of real estate situated in the territory which they cover.
Some abstract companies write what are called "guaranty policies" which are assurances by the company that the title is good, subject to whatever defects may be named therein. This is simply title insurance and the company must stand good for loss up to the amount named on account of defects not excepted.
A guaranty policy of course does not operate to give a good title but it is merely an insurance upon the title.
This practice is growing in favor and purchasers are now frequently content with such policy and no abstract.
An opinion of title is a written statement by an attorney or other examiner of the title setting forth that person's opinion of the title based upon his examination of the abstract.
We have seen that the buyer secures an abstract of the title to be examined. Usually he has his attorney to examine this and the attorney reports his opinion of the title. This opinion is merely the attorney's conclusion when he has examined the title. It sets forth that the attorney has examined certain abstracts therein named and that upon such examination he finds title on a certain day in a certain person subject to the burdens and defects which he then enumerates. This opinion should give the exact state of the title showing all mortgages, liens and claims of whatever sort as shown by the abstract which he has examined. As we know parties in possession have rights which must be taken account of, and consequently the attorney always finds title subject to the rights of parties in possession, if any. This is merely to protect himself or call attention to the fact that the purchaser must know whether there are any parties in the possession and what their claims are. This opinion of title may be looked upon in a way as a very brief abstract of the abstract.
Where guaranty policies are secured the opinion is generally omitted because the guaranty policy is based upon the opinion of the abstracter's attorneys.