In the case of outright fraud, a person might show up at the closing claiming to be someone they’re not — such as the seller’s spouse — or, someone might forge or fabricate legal documents to claim ownership of the home.

“If you’re not careful, you can end up paying off someone you’re not supposed to be paying,” Oppenheim says.

5. Unknown or missing heirs

Ownership disputes can arise if the property owner died before selling the home. Family members who were missing when the person died might eventually step forward to claim their inheritance or contest the owner’s will for ownership — or, the owner’s will itself could have been missing and then discovered right before closing, with stipulations about who rightfully owns their home.

Finding and fixing title issues

Title companies and real estate attorneys are third parties that help identify and resolve property title issues during the mortgage closing process.

Here’s a breakdown of each role:

• Title company – A title company researches the property in question to make sure the title to the home is legitimate and that there are no defects. The company also provides title insurance as protection against any issues that might surface in the future. Title companies offer this coverage to protect the lender and the buyer from any losses related to property title issues, such as if an issue needs to be remedied in court.
• Real estate attorney – Also called a closing attorney, a real estate attorney can help you settle any title issues that arise, as well, including ownership or boundary disputes, a contested will or a lien on the property. An attorney can also re-file public documents to correct errors. “A title attorney is essential because they are going to hand you a clean title at closing,” according to Al Sidhom, Realtor with Witry Collective in New Orleans.

It takes a lot of legwork to make sure there are no title surprises before closing. The primary research the title company or attorney conducts is called the title search, which consists of looking up any and all public records that exist on the property.

This is necessary due diligence that can help expose any liens, land restrictions or other issues that might get in the way of completing the sale. A title company can conduct an exhaustive search of public records going back decades to look for errors, wills, debts, bankruptcies and inaccurate property details ahead of time.

Upon request, your title company may also be able to conduct a permit history search. It’s important to note, however, that title reports usually don’t list open permits, nor do title insurance policies provide coverage if these emerge, so it’s up to the seller to ask.

An outstanding permit for previous work on the home may cause a lender to back out on financing, and it can create major headaches for the new homeowner when it comes time to remodel or repair the home.

“If you have an open electrical permit on your home that was never closed out, it will prevent you from getting any other permits in the future,” says Sidhom.

To help prevent boundary disputes, on the other hand, an up-to-date property survey can clearly delineate property lines. Sidhom recommends this to buyers who are purchasing a property without a fence already installed.

“With the property survey, you get specific markers for where your property begins and ends,” says Sidhom.

If the attorney’s or title company’s work falls short, title insurance offers protection to get any undiscovered issues resolved. Lenders usually require the borrower to obtain a lender’s title insurance policy, but this kind of policy only protects the lender. You must purchase a separate policy for owner’s title insurance if you want to protect yourself.

All title search, legal fees and title insurance are usually tied into your overall closing costs.

“People think title insurance is a necessary evil to closing, an expense, but it has saved my clients a lot of money when something goes wrong,” Oppenheim says.

Learn more:

• How to avoid mistakes when closing on your mortgage
• How much are closing costs for home sellers?
• What is a mortgage lien? How this and other kinds of home liens work