If you have ever purchased a house through a realtor and with a mortgage, then you have seen a title commitment. This is a "bill of health" from a title insurance company, alerting you to those owners the property you are purchasing and to any liens, mortgages, or encumbrances on the property. It is essential that you get a title commitment and title insurance.
A typical sales agreement requires the seller to give the buyer a "warranty" deed. The word "warranty" means that the seller is guaranteed to the buyer that he / she owns the property, that it consist of the legal description set forth in the title commitment, and that the liens, encumbrances, and mortgages will have been discharged at the time of closing so that the property is transferred without any baggage. As an aside, if the sales agreement was signed by one person but the title commitment indicating that there are two owners of the property, both of the owners must sign the closing documents for the sale to be consummated. If the property is owned by an estate (because the owner died), the personal representative may need to get a court order to obtain the authority to sign a deed on behalf of the estate. If the property is owned by a corporation, then a majority of the shareholders must consent to the sale through a corporate resolution for the sale to be effective.
When there is no title insurance guaranteeing the legal description, the legal owner, and the absence of encumbrances at the time of closing, the buyer usually receives a mere "quit claim" deed. This means "buyer beware" -in spades. The buyer may later have a claim for fraud against the seller, but that means a lawsuit and potential problems with collecting on a judgment. If, on the other hand, you have title insurance and discover that legal description was wrong, the seller did not have the right to sell the property, and / or liens or other encumbrances were not disclosed or not discharged, you can file an insurance claim and hopefully be paid almost immediately.
When you buy property, especially if it has been foreclosed or you are buying it as a "short sale," be sure to get a title insurance commitment. The commitment provides direction for what needs to be done to remove liens, encumbrances, and mortgages from the public record. The commitment, however, can "expire." There is a date, usually at the top, that reflects the last date that title to the property was checked. You can request that the title commit be "updated" to the date of the sale. If it is not and you accept a commitment with a stale date, then you may not be able to complain if the IRS filed a lien against the property the day before the sale, and the title company did not discover it. Because title insurance companies are connected these days to the Register of Deeds office, it is …