Title search: what it finds and why it matters

Who does it

In most transactions, a title company, settlement agent or real estate attorney performs or orders the search. NAR's consumer guide notes that a buyer's attorney may conduct or confirm the title search and resolve title issues. The CFPB says title service fees include the search fee, the lender's title insurance premium and related services, and that in most states the fee for conducting your closing is part of these charges.

Your Loan Estimate shows title services in section B or C of page 2. If they are in section C, the CFPB says you can shop for them separately. The CFPB's homebuying guide suggests researching providers early, because once you find a home things move fast.

What the search covers

The searcher reviews public records tied to the property, typically including:

• The chain of deeds, to confirm the seller holds title and that past transfers were properly recorded.
• Mortgages and deeds of trust, to identify loans that must be paid off at closing.
• Liens, such as unpaid property taxes, contractor or mechanics' liens, HOA liens and judgment liens.
• Easements and restrictions, such as utility easements, shared driveways and recorded covenants.
• Legal description and boundaries, to make sure the property described matches what is being sold.

Common problems and fixes

Most title issues are routine and resolved before closing.

Some problems take time, such as an estate that has not been through probate or a dispute with a neighbor. Those can delay or derail a closing, which is why the search starts soon after you sign the contract.

Reading the title commitment

The search results usually come to you as a title commitment or preliminary report. It typically has three parts:

1. What will be insured, including the proposed buyer, lender, amount and legal description.
2. Requirements, the steps needed before a policy can be issued, such as paying off the seller's mortgage or recording a release.
3. Exceptions, the items the policy will not cover, such as recorded easements or restrictions.

The exceptions deserve your attention. An easement allowing a utility to run lines along the back of the lot is ordinary. A recorded restriction barring a fence or shed you plan to build is something you need to know now.

Lender's vs owner's title insurance

Title insurance protects against covered problems the search missed or that could not be found in records. The CFPB explains:

• Lender's title insurance is usually required to get a mortgage and protects only the lender's loan. It does not protect your equity.
• Owner's title insurance is optional and protects you if someone later sues and says they have a claim against the home from before you bought it.

The CFPB notes that if you buy an owner's policy, the total cost is usually lower when you use the same provider for both policies. Owner's title insurance appears in section H of your Loan Estimate.

Check your vesting

The deed and title documents will say how you hold title, for example as a sole owner or jointly with a spouse or co-buyer. That choice affects what happens if one owner dies or wants to sell. Make sure the names are spelled correctly and the form of ownership is what you intend; ask an attorney if you are unsure.

The bottom line

A title search reviews public records to confirm the seller owns the home and to find liens, unreleased mortgages, errors and easements. Read the title commitment's requirements and exceptions, make sure every lien is cleared at closing, shop for title services when you can and consider an owner's policy to protect your own equity.