Things you need to know about property titles

When you purchase a home, the title is transferred from the seller to you, giving you rightful ownership. It’s crucial to make sure that the title is clear and free of any claims, disputes, or other obstacles before completing the purchase.

What is a title search?

To ensure the status of a property title, a title search is conducted, usually by a title company or an attorney. This involves an inspection of public records to uncover any potential defects, such as outstanding claims and liens against the property. If any problems arise during the title search, they typically must be resolved before you can proceed with the purchase.

Once the title search is complete and no issues are found, title insurance comes into play. This insurance offers protection against any claims of ownership or other problems with the property title that may occur in the future. 

Title insurance

There are typically two kinds of title insurance policies:

• Owner’s title insurance – may be paid for by the buyer in some states and the seller in others; protects the buyer
• Lender’s title insurance – typically paid for by the buyer; protects the lender

An owner’s policy usually provides coverage equal to the purchase price of the new property. It protects the buyer if a problem is uncovered after the title search is completed. 

A lender's policy, also known as a loan policy, protects a mortgage lender's interest in a property and typical coverage is up to the outstanding mortgage amount if an unknown title defect comes to light.

Understanding the title search and insurance process may give you peace of mind throughout the homebuying experience.

Problems with the home title

The party conducting the title search will look for any claims or other concerns that may affect your purchase. The search includes public records, such as land records spanning many years.

Here are a few examples of problems that may be revealed during a house title search:

• The previous owner failed to pay state or local taxes.
• There is an undisclosed owner.
• The deed has mistakes or omissions. 
• The deed has been forged.

Resolve issues with the property title

An attorney specializing in real estate law, title insurance company, or a local clerk’s office may help you solve any issues related to the title of the property you want to purchase, such as liens on the home and ownership disputes. 

Working with one of the above may also help you address easements, restrictions and rights-of-way that could limit your use of the property.

What to do with a house deed

A deed is a legal document that shows title ownership. Once you are the owner of your new home, place your deed in a safe place, such as a safe deposit box at the bank.

What happens to your property title when you sell?

When you sell your property, your title ownership is transferred to the new buyer. That party will receive a copy of the deed after closing, confirming that they now own the property and that you no longer have any claim to it. The deed that you hold is now invalid.