But how does one know that the property they purchased has a clear title?

Because unknown problems can be hidden in the history of a property's title, homeowners pay for title insurance.

Title insurance is an insurance policy that guarantees the property title is free from the problems of hidden liens and claims.

Public records for the property are searched to find problems in the title's ownership and history.
The fee for title insurance is usually included in the itemization of closing costs from the lender and is a one-time fee.

Possible hidden title problems can include:  

*  Errors or omissions in deeds * Undisclosed Heirs
*  Mistakes in examining records  * Liens by Contractors
* Liens for unpaid taxes *  Forgery   

Title insurance pays for title companies to search for problems in a property's title by examining public records.

Public records that are routinely searched include: 

*  Deeds   *  Mortgages 
*  Liens  *  Tax records
*  Claims *  Wills
*  Maps  *  Divorce Decrees
*  Court Judgements   

By searching the history of the property's title the new owner can be assured of clear ownership to their new property and that no outstanding debts or unknown ownership issues are associated with their new home.
In addition, besides securing a good search on a property's title, title insurance will insure the property owner as long as s/he owns the property.

Therefore, if a problem arises at a later date, the title insurance policy will cover legal fees in defense of a claim against the property that is covered under the title policy.

Think you have to settle for whatever title insurance company your lender puts in your closing papers? Not true-you have the right to choose your title insurance company.

Usually the title insurance is already put into the closing cost figures when buying a new home and most don't even give it a second look.

But title insurers, like any insurance company, offer different costs and you have the right to choose what company you want to purchase your policy with.