So, just what does a title company do? First let’s rewind and talk a little about how we got here. In the early days on property sales, a conveyancer was required to handle the sale of any property. Their job was to determine if the title to the property was “unencumbered”. This means that only the seller owns it and no other person can take it to pay any debts.
There was no insurance or guarantee that conveyancers would be held accountable for their mistakes.
Title companies today search for property titles in the same way conveyancers used to do, which is known as a title search. They have also offered title insurance since the late 1880s. This is their guarantee that you will be protected in the event of a problem that they didn’t find.
What is a Property Title?
A property title is the title that records the owner of a property. It shows the history of who owned it in the past, gives a physical description of it and lists any liens. Your mortgage will appear on the title as an attachment if you have just purchased the house.
This is different to a deed which is a document that you receive at closing and states that you own the property.
Understanding the Difference Between a Title and a Deed
It is important to know the difference between a title vs a deed. A deed is a legally binding legal document that transfers property from one owner to another. This document is signed and witnessed by the closing agent before it is given to you, the new homeowner.
It includes a description of each property to ensure everyone is aware of what is being transferred. This document is filed with the property clerk and is made available to the public.
The title refers to the rights that parties with ownership interests hold. It can be compared to a movie or book title in that it is a concept and not a physical object. It is the same as ownership, which gives rise to intellectual property.
What is a Title Company?
A title company is a third party that acts on behalf of the buyer and the lender. They are hired to help you research and insure your home’s title.
What is the point of this? Let’s suppose you purchase a home without hiring title companies. You find out that the seller actually only owned half of the property when his father died. His brother owns the other half of the inherited property. He comes knocking at your door to demand his 50%. Imagine how unpleasant that would be for everyone.
You can trust the title company and the title insurance they offer to protect you against any liability. This is an essential part of closing.
Here’s what to expect from your money now that you’re familiar with the basics of a title company and its importance.
Chain of Title
Title companies will search for the “chain of titles,” which is the complete history of the property’s ownership. A title company search would have found the second owner, and prevented the sale from being completed.
They will also check for existing liens so that you don’t discover the unpleasant truth that a contractor has not been paid for any past work done on the house and is now awaiting payment from you, as the new owner. They will also ensure that all property taxes are paid.
Title Research And Property Survey
A property survey will be conducted by your title company. Surveys are required to close on a house in most states. They ensure that the home is within the boundaries of the title. You also need to verify if the fence of your neighbor is on your property.
After the research is completed, the company will provide a report known as a “title abstract”. This copy can be reviewed by you and your lender before closing on your home. The abstract is not your title policy. This is a separate document that you will receive from your agent.
How to determine who holds the title
Your title company should work closely with you to ensure that your title correctly describes who is entitled to transfer ownership. If you decide to sell your home, the title phrase you use may affect how you pay property taxes or fees.
It’s simple if you are not married and the only person on the title. You hold the title in sole possession. It gets complicated if you are married or reside in a state with community property. Your title company can help you decide what is best for you and what the title should read.
Closing
The closing of your home is usually managed by title companies. This service is sometimes called “settlement.” A signing agent or real-estate attorney is appointed by the company to review all closing documents, and then finalize title and deed transfer.
Funding
With the assistance of an escrow agent, title companies can hold and manage money in escrow. An escrow account can be described as a savings account that is managed by a third party, in this instance the title company. It distributes payments under certain conditions.
Escrow accounts are common for real estate transactions as mortgage lenders want to ensure that you have enough money to cover certain expenses. If your lender requires that you keep escrow for a specific amount of time, the title company will likely manage this account for both of you.
All parties involved in the purchase of a house need to send and receive funds. Your title company’s agent will help you find the most secure and convenient way to transfer funds.
Title Insurance
Two types of title insurance policies are offered by title companies: one for the buyer and one for the lender. Your lender holds a financial interest in your property.
Title insurance protects them just as much as you do. If someone makes a claim for the property that was not covered in the title search, it covers you legally and financially.
The seller of the house you are buying will pay for your title insurance policy. You will pay for the lender’s policy. You only need to pay the title insurance once you have closed on the property. This is in contrast to most insurance policies which require you to pay a monthly or yearly premium to maintain your coverage. The title insurance covers you for as long as you own your home.
FAQs about Title Companies and How They Help Buyers and Sellers
Title companies help buyers to close on their properties quickly and easily. It’s normal to have questions when you are close to closing or searching for a title company. These are the top questions that people ask.
What do I need to do to work with a title company?
Although mortgage lenders require that you work with a title company in order to issue a loan, this is not required by law. It’s still a good idea, even if you are paying cash for a property. The title company will conduct extensive research to ensure that the sale is possible.
What documents are required by title companies at closing?
Both buyers and sellers will need to be provided with all necessary documentation by the title company. Buyers will typically need to bring basic documents such as proof of insurance and photo IDs. However, your title company and real estate agent can let you know if any additional documents are required.
What can the title company do to help sellers?
Although title companies are primarily for buyers, they also help sellers by handling all paperwork, negotiating any lien payouts or settlements. and coordinating the closing process with buyers.
Can title companies remove liens?
While title companies cannot remove liens, they can assist sellers in negotiating and settling with lienholders that were discovered during the title search process. It is ultimately up to the seller, to decide the best course of action and to pay any settlements or payments.
Who chooses the title company?
Each buyer and seller have representation from a title agency. The seller and buyer are not required to use the same title company. If you aren’t sure what company to choose, your lender or real estate agent can give recommendations.
What issues can the title company discover?
Title companies can identify any problems that could prevent a property from being legally sold. These issues include:
- Liens
- Work not paid for
- Unidentified owners or heirs who claim the property
- Assessments of special interest on the property
- Outstanding loan on the house
- Etc.
What happens if there are issues with the property that the title company discovers?
The title company will notify the buyer and seller if they discover any problems with the property. These issues can cause the sale of the property to be canceled. However, both the seller and buyer will make every effort to resolve the problem and move forward with the sale.
What is the cost of title services?
You will receive a Loan Estimate from the lender when you apply for your first approval. This form gives an estimate of your closing costs. Although you will receive an estimate for title insurance (which is something you can shop for), this portion of your closing costs could be significantly reduced.
The National Association of REALTORS states that title services can cost as much as $2,000 but it all depends on how many quotes are received. The following factors can affect the cost:
- The amount of the loan
- The cost of the house
- Your geographical area
The title company will likely offer you a better deal if you combine the owner’s and lender’s title insurance policies.
The bottom line: Title companies protect both buyers and sellers
The title shows who owned the property, a description of it, and any liens.
Your title company is an impartial third party that you hire to research and insure your home’s title. They’ll also manage the closing of your home.