What is a title search and why is it necessary before closing?

• A. A check of the property's title to confirm ownership and absence of liens or defects; ensures marketable title at closing.
• B. An appraisal of property value used for pricing the loan.
• C. A review of the borrower’s credit history.
• D. A verification of the property’s insurance coverage.

Answer: (B)

A title search verifies the property's title by reviewing public records to confirm who owns the property and to uncover any liens, encumbrances, or defects that could affect transfer. This process ensures there is a marketable title at closing, meaning the seller actually owns the property and there are no unresolved claims that would prevent the buyer from obtaining clear ownership. During the search, professionals look for issues like outstanding mortgages, judgments, easements, or defects in the chain of title, and they address any problems before closing, or arrange title insurance to protect against undiscovered defects.

This is distinct from an appraisal, which focuses on property value for loan pricing; a borrower's credit history, which assesses repayment risk, and property insurance coverage, which protects the property but does not affect title transfer.