This means examining public records, in courthouses and elsewhere, to assure both you and your lender that there are no claims against the property that you are buying. The title search may be carried out by an escrow or title company, a lawyer, or other specialist. In addition to a formal title search, your lender is likely to require a title insurance policy. The policy guards the lender against an error by whomever searched the title. Though it should have been found in the public records, the relative's claim was missed somehow.
Errors are rare, but they do occur.
When this happens, the lending institution finds that it has loaned the home buyer thousands of dollars to buy a house from someone who did not own it. To avoid such problems, the lender will insist on title insurance prior to settlement. There's nothing, however, to keep you from asking the seller, during your negotiations, to pay part or all of the premium. The title insurance required by the lender protects only the lender. To protect yourself against unforeseen title problems, you may also want to take out an owner's title insurance policy.