How to Read a Title Report: Red Flags That Kill Deals

You're holding a title report for what looked like a solid flip. The property is listed. The numbers pencil. Then you see it: a lien filed by a contractor from 2015. A utility easement running through the backyard. An exception for "unpaid property taxes." Most investors scan these and move on. The disciplined ones stop and read like their capital depends on it—because it does.

A title report is your legal map of who has a claim on the property before you buy it. It tells you what you're actually getting, what strings come attached, and whether the deal is worth the risk. Learning to read one takes an hour. Ignoring it can cost you tens of thousands.

What's Actually in a Title Report

A standard title report lists the current owner, the property description, and then a section called "Exceptions and Encumbrances." This is where the truth lives. Everything in that section—liens, easements, restrictions, unpaid taxes, judgments—is a legal claim or limit on your use of the property. Some are minor. Some are deal-killers. Your job is to tell the difference.

Title reports come from a title company that searches public records. They're not perfect—they can miss things—but they're your first line of defense. Before you sign anything, you need to understand what each item means and what it costs you.

Liens: The Most Dangerous Item on the Report

A lien is a legal claim against the property to secure payment of a debt. When you buy the property, you often inherit the lien—or you have to pay it off at closing from your proceeds. Common liens include tax liens, mechanic's liens (from unpaid contractors), judgment liens (from lawsuits), and HOA liens (from unpaid fees).

• Tax liens: The government is owed property taxes. These almost always must be satisfied before closing.
• Mechanic's liens: A contractor or supplier wasn't paid. These can survive for years and complicate your exit.
• Judgment liens: Someone won a lawsuit against the owner. They have a claim on sale proceeds.
• HOA liens: Unpaid homeowners association fees. Often underestimated but can be substantial.

When you see a lien, find out the exact amount, the date it was filed, and whether the owner disputes it. A small, recent lien that can be paid off at closing is manageable. A ten-year-old judgment lien for $50,000 from a contractor you can't reach is a reason to walk.

Easements: Rights Others Have on Your Land

An easement gives someone else the legal right to use part of your property—usually for utilities, access, or drainage. You own the land, but they own the right to cross it, dig under it, or string lines across it. Easements don't go away when you buy; you inherit them.

• Utility easements: Power, water, sewer, gas companies need to maintain lines. Usually standard and low-impact.
• Access easements: A neighbor's right to cross your land to reach theirs. Can restrict your development plans.
• Drainage easements: Runoff from neighboring properties may legally flow across yours. Limits use of that zone.
• Conservation easements: Permanent restrictions on development or land use. Severe limits on future value.

A utility easement behind the house is normal and rarely a deal-killer. An access easement that cuts through your best buildable lot, or a conservation easement that locks you out of development, is a red flag. Ask yourself: Does this easement prevent the business plan I intended?

Encumbrances: Restrictions on What You Can Do

An encumbrance is any claim or restriction on the property's use. Covenants, conditions, and restrictions (CC&Rs) are common in subdivisions and require you to follow rules—no commercial use, paint colors, landscaping standards, and so on. Deed restrictions can be even older and more unusual.

Read these carefully. If you buy a property zoned for single-family residential but the deed has a restriction that says "for residential use only, no income-producing activities," you can't legally run a short-term rental or divide it into units. Some restrictions are decades old and unenforceable; others are actively enforced by HOAs or neighboring owners. When in doubt, ask a local real estate attorney about enforceability.

Exceptions: What the Title Company Won't Guarantee

At the end of most title reports is a list of "exceptions"—items the title company explicitly says it will NOT cover if they cause a problem. These might include survey issues, zoning violations, building permits, or anything not recorded at the courthouse. An exception for "any defect shown by current survey" is common. An exception for "unpaid property taxes" is a warning sign.

If the title company is excepting something, they've either found a red flag or they can't verify it. Your job is to investigate. If taxes are unpaid, get a payoff amount. If the survey shows encroachments, measure the impact. If there's an exception for building permits, verify the house was legally built. Exceptions are not automatic deal-killers, but they're your checklist of things to verify before closing.

Red Flags That Should Make You Stop

• Unpaid property taxes with no clear payoff amount or timeline for resolution.
• Recent mechanic's liens from contractors you can't identify or contact.
• Multiple liens from different judgment creditors—suggests a distressed seller with ongoing problems.
• Easements or restrictions that prevent your intended use (flip, rental, development).
• Exceptions for major items like zoning violations or unpermitted structures.
• Conservation easements or deed restrictions that permanently limit development.
• An HOA with a history of large special assessments (verify through HOA records).
• A title report that shows ownership changes hands frequently in a short window—possible fraud or problem flips.

How to Handle Title Issues Before You Close

Once you spot a problem, you have options. You can negotiate with the seller to pay off liens before closing. You can request a title insurance endorsement for certain exceptions. You can hire an attorney to research old restrictions and their enforceability. You can order a new survey if the current one is outdated. Or you can walk away—which is often the best decision.

The goal is to know exactly what you're buying and how much it costs you in time, money, or reduced exit options. A $15,000 lien that you can pay off at closing is very different from a $15,000 lien that no one knows how to remove. The title report tells you which is which—if you take time to read it.