When you’ve found your dream home and put down the earnest money, the likely assumption is that the seller has the legal right to sell the property. But whether the seller knows it or not, there may be a claim or lien against it that may affect his/her actual ownership interest.

That’s why a title search is conducted during the escrow period. The search digs into public records to determine the rightful, legal owner and ensure their authority to sell it. The search will reveal any potential claims against the property, such as a mortgage lien, outstanding property taxes, or unpaid bills to contractors for home improvements.

If you skip the title search, or it fails to uncover all clouds on title, you could end up inheriting any potential liens, judgments, or claims when you become the new owner. That’s why mortgage lenders require a title search – and typically lender’s title insurance – as part of the underwriting process.

Once a title search is ordered, a professional title agent pulls together from county records all the information and public documents available regarding the property’s present and former owners. A chain of title is established along with evidence of any potential financial or legal claims against the property, any recorded documents or lawsuits connected with it, and any easements that give another entity the right to temporarily access the property (such as the gas company to read the meter.)

But even the most conscientious title search is not infallible. What if the title search fails to uncover a potential threat to your ownership – such as a previously unknown relative of the former owner who turns up to file a claim?

You can mitigate such potential risks by purchasing the owner’s and the lender’s title insurance policy, which will protect both you and your lender. The one-time purchase can give you peace of mind and help protect your interest in the property, making the expense (usually 0.5% – 1% of a home’s purchase price folded into your closing costs) well worth the price for most home buyers.

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This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice.  

About Bobbi Pronin

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. 

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.