Title search: what it checks before you close

What is a title search?

The CFPB says “title services include title insurance, title search, and other costs and services associated with issuing title insurance,” and calls them the largest costs among the closing services you can shop for. Who does the work, a title company or an attorney, can vary by state. The outcome is a title report or commitment that lists what the search found and what must be fixed before closing. FHA tells its lenders to “order a title commitment to ensure the Property will be properly titled and the Mortgage secured.”

What a title search looks for

Federal sources describe the following matters, which a search is meant to uncover.

• Chain of title. FHA requires evidence of prior ownership when the property was sold within the last 12 months, to catch undisclosed transactions between related parties.
• Mortgages and other liens. Fannie Mae requires a title policy that “must list all other liens” and state that they are subordinate to its mortgage.
• Federal tax liens. A federal tax lien is the government’s claim against a person’s property, including real estate, when a tax debt goes unpaid. The IRS files a public Notice of Federal Tax Lien, and it releases the lien within 30 days after the debt is paid in full.
• Easements, encroachments and restrictions. HUD’s title exceptions rule (24 CFR 203.389) lists common items it tolerates, such as utility easements, small encroachments of up to one foot, customary building and use restrictions, and mineral rights customarily waived by prudent lenders. Other defects need a waiver.
• Claims from the past. The CFPB says legal claims can arise from “a previous owner’s failure to pay taxes” or unpaid contractors.

A search reads records. It can miss what the records do not show, which is why title insurance exists. Ask for the title commitment or report early, read the list of exceptions line by line, and ask about every item you do not understand. Items that a search finds are known risks you can negotiate or fix. The ones it misses are what an owner’s policy is for.

From search to insurance

Title insurance is the protection that remains after the search. The CFPB explains:

The CFPB says the total cost is usually lower when both policies come from the same provider. Fannie Mae requires coverage at least equal to the original loan amount, written on the 2021 American Land Title Association loan policy form (or an equivalent) for loans originated on or after January 1, 2024. You may be able to choose the title company: RESPA bars a seller from requiring a particular title company as a condition of sale, on penalty of three times the title charges (12 U.S.C. 2608). Details are in title insurance explained.

Reading your results

If the report shows a problem, ask your agent, attorney or closing company what must happen before closing. On an FHA loan the lender must clear objections to title, or request a waiver for exceptions outside the General Waiver. If a waiver is denied and good and marketable title is not obtained, “the Mortgage is not eligible for FHA insurance.” See home buying steps, closing costs explained and earnest money.

A title search does not show physical boundaries or building condition. For those, see land survey cost and home inspection cost.

Where states differ

States decide how records are kept, who may conduct a closing and whether an attorney handles title. Find out if your state requires one in attorney at closing by state, and compare closing costs by state. State pages include Texas and California.