Abstract of Title
What it is:
An abstract of title is a history of a piece of property.
How it works (Example):
For example, let's say John Doe wants to buy the house at 123. As part of the transaction, his title insurance company obtains a copy of the property's abstract of title. They want to make sure that Jane Smith, who is selling 123 , is the legal owner of the property and that there aren't any other claims on the property. The abstract of title shows all of the legal actions related to the property, as well as the names of any entities that have liens on the property and all the previous owners.
Why it Matters:
The abstract of title is a written history of a piece of property and can be fascinating for older pieces of real estate. However, its primary use in most real estate transactions is to ensure that the seller of a piece of real estate is the actual owner of the property and that nobody else is claiming ownership of the property. Title insurance companies, which guarantee that the property is owned by the stated owner, are thus particularly interested in abstracts of title. If they overlook something, they may be subject to paying claims.