Title company gives you a title commitment stating the history of ownerwhip and the claims, if any, against the property. Chain of title must be continous without any interruption.

How can you detect cloud in title search?

There should be no gap in the transfer in title history. There is a risk of having a claim against the property if there is a gap.

Building permits are listed in title history. If you see rooms, bathrooms, or any other structure added to the property, check if their permits take place in title history. If you cannot see any, then that structure was added without permit.

Title insurance

It protects you from any defect in the title that was not found during the title search. Title insurance companies make their lawyers available to represent you in case your ownership is challenged.

Types of title insurance

There are two types of title insurance:

Lender’s title insurance that is required by the lender and covers the loan amount. Insurance coverage is reduced every time you repay your home mortgage loan.
Owner’s title insurance that covers the full amount of your policy.

Benefits of your title insurance

Your title insurance covers you against the following (this is not an exhaustive list):

Forgery and fraud
Missing heirs
Mental incompetence of sellers
Transfer by a minor
Inaccuracies in legal descriptions
Claims that have not been satisfied on records
Name confusion
Clerical errors
Non-delivery or delivery of deed after the death of seller
Errors and mistakes in wills

Make sure that your title insurance also covers mechanics’ liens. Title insurance is a peace of mind for you to avoid any financial loss againt a ligitimate claim if the title company may have missed.

More information on title services and home ownership

Sources of title services by Real Estate Library
For your rights under the Home Ownership and Equity Protection Act which amended the Truth in Lending Act, visit Federal Trade Commission (FTC) web site.