The decision to purchase a home (or other real property) is probably the largest and most important financial decision you may ever make. You and your lender will want to make sure that the property is indeed yours and that no one will have liens, claims, or encumbrances on your property. Title insurance guarantees that the title to real property is free from all defects in title that may exist in the public records for that property.
Possible title defects include:
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Errors or omissions in deeds
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Mistakes in examining records
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Forgery
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Undisclosed heirs
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Missing heirs
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Liens for unpaid taxes
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Liens by contractors
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Before issuing a policy, title companies check for defects in your title by examining public records including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps. The title search determines who owns the property, what outstanding debts are against it, and the condition of the title.
Title companies also handle property closings and hold earnest money in a trust account, also known as an escrow account, until the purchase is complete.
