Step 6 — Protect Ownership
In an FSBO transaction, no one is automatically verifying the seller has the right to sell the home or that there are no outstanding liens. That's your responsibility — here's how to handle it.
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A title search is a review of public records — deeds, mortgages, court judgments, tax records, and other documents — to verify that the seller has clear, legal ownership of the property and that there are no liens, encumbrances, or other claims against it.
In a traditional real estate transaction with a buyer's agent, a title company is automatically engaged as part of the closing process. In an FSBO deal, you need to initiate this yourself.
Unpaid contractors who worked on the property can file a lien — and it follows the property, not the seller. You could inherit a $20,000 roofing debt.
If the seller has delinquent taxes, the county can place a lien. This must be cleared at closing — often from seller proceeds.
Federal tax debts attach to all property the debtor owns. The IRS has superseding priority over most other lienholders.
Court judgments against the seller (lawsuits, divorce decrees) become liens on all their real property.
Unpaid HOA dues can result in liens — and in some states, HOA liens can supersede the mortgage lender's claim.
Fraudulent deeds do happen. Title insurance protects you if someone else claims ownership based on a forged document in the chain of title.
Encroachments from neighbors (fences, driveways built over property lines) can create title complications.
If the seller inherited the property, a missing heir could surface later with a competing ownership claim.
Search for title companies in the county where the property is located. Call and tell them you're in an FSBO transaction and need a title search and commitment. They do this regularly.
In attorney-closing states, your attorney handles the title search. In title-company states, an attorney can still order one on your behalf.
The title company needs the address and ideally the legal description (found in the current deed at the county recorder's office).
The title company issues a "title commitment" (or "preliminary report") listing any issues they found that need to be resolved before they'll insure the title.
Liens must be paid off (usually from seller proceeds at closing). Judgment liens, tax liens, and HOA liens are typically resolved this way.
Required if you have a mortgage. Protects the lender (not you) against title defects. Premium is typically 0.3–0.5% of the loan amount — paid once at closing.
Optional but strongly recommended. Protects you against future title claims — including forgery, missing heirs, and errors discovered after closing. One-time premium: 0.5–1% of purchase price.
In most FSBO transactions, the seller and buyer split or negotiate who pays for title insurance. Ask your title company about simultaneous issue discounts — buying both policies together is cheaper than buying them separately.
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