Optimal Title Search
Posted: 10 Apr 2002
In the U.S., title to land is protected by a system of public records that would-be buyers must consult in order to ensure that they are dealing with the true owner. Search is a costly process, however, especially as one goes back in time and the records deteriorate. This paper uses a sequential search model to determine how far back in time buyers should search. We find that in general, search of the entire record is not optimal, which implies that optimal search does not establish title with certainty. We test the model using state statutes and search guidelines that limit the required length of title search. Our results show that the search limits vary across states according to the predictions of the model.
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