An attorney as well as your lender will perform a title search. A title search is a physical review of the title report which outlines any current and previous legal liens in the property. A property cannot change hands unless all existing claims are settled and a title search will highlight any issues. If there are any issues with the title report, your mortgage cannot close.
The seller of the property should be listed as the current owner but the report will also show all previous owners of the property each time the property changed hands. If there were any problems with a transfer, called a “defect” the problem must be resolved.
For example, a title search is performed and there are existing property tax liens from last year’s property tax bill and there is a mechanic’s lien filed in the amount of $2,000. A mechanic’s lien is a legal interest in the property filed when there is work performed on the property such as a new roof or a recent remodel. The contractor files a mechanic’s lien and will only release it once satisfied. All unsatisfied liens and interests in the home must be reviewed and resolved completely.
Much like approving an appraiser and the borrower, the title must be approved by the lender as well.