A title represents the ownership of a property. When you purchase a home, you also will purchase what is called title insurance. Title insurance-which is different from either homeowners insurance or mortgage insurance-protects both you and the lender from claims that have been, or in some cases will be, placed against the property. Without a clear title, you may lose your home.
Title insurance is designed to protect both of you, but the usual situation is that you will be purchasing both policies.
A title company is hired by the seller’s attorney to investigate whether there are any claims or liens against the property. This is normally done through the county recorder’s office, where the investigating company can pull the title of the property to see if there are any liens against it.
If there is a lien, it will be reported to the client (the seller’s lawyer), who must report it to you-the buyer. Your lender will then require that the seller pay off the lien so it can be removed from the property’s title. This is most often done at closing. You will then be able to purchase your new home without further concern, as you will receive a title insurance policy guaranteeing that there are no more liens on the property (other than your existing mortgage).
This is binding: If some lien or claim is missed and becomes an issue in the future, you won’t be responsible for paying the costs involved in addressing and/or removing it.