Understanding the Role of a Title Company

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With every single real estate transaction, there will be a host of professionals at the table and in your corner to help you execute a seamless deal. They are essential in managing every detail, from lending and paperwork to real estate offers and escrow. You will find value in each of those pros only when you completely understand what it is they’re doing for you. Are they reducing your risks? Are they coaching you through tough decisions? Can they save you money? 

One such professional presence in the real estate transaction process is the title company. But to really recognize what benefits a title company brings to your deal, it’s best to first understand the entire role and all responsibilities. With these insights, you’ll know better than to navigate a purchase or sale without one, and you’ll be best prepared to select the right title company partner for you.

Title Companies Handle, Well, Titles

But there’s so much more. Titles, deeds, plots, loan documents, and insurance are all in the mix here. And primarily, the title company assigns teams of professionals to each step of the process. There are researchers who gather historical data about a property and title examiners who evaluate the legal change of hands over the years. There are liens to look for and gaps where improper records were kept that need updating. And there are professionals that coordinate with lenders to get your loan documents ready for closing day, compiling and confirming all the figures dealing with escrow, payoffs, and check disbursements. Additionally, there is the insurance aspect, required by some lenders and requested by many buyers as a layer of protection that the transaction is proper and legal. Whew. Can you imagine trying to navigate a real estate transaction without the title company?

Let’s dig in a little deeper and explore just how important the role of a title company really is.

Title Search and Review Process

One of the first duties a title company partner will take on involves thorough title searching. The goal is to identify any potential obstacles that might affect the ownership transfer of a property. 

Here are just a few search-related issues that may arise that a title company can help you avoid:

Outstanding mortgages: The current homeowner might have a mortgage attached to the property. A title search will verify the existence of this mortgage, or any others, that will need to be paid before transferring the title.

Outstanding liens: Home equity lines of credit are common. And these liens will also need to be identified and fulfilled before the title can change hands. But there are other liens that might exist with the current owners or owners past. And those will also need to be remedied before moving forward with a new purchase.

Unpaid HOA dues: If the property in question has terms regarding HOAs, there could be liens present in an attempt to collect unpaid dues. A proper title search will uncover these terms and any remaining liens that may need to be satisfied.

Property judgments or unpaid taxes: If the current or previous owners have unfulfilled responsibilities associated with property taxes, liens could exist. Maybe it’s from an unpaid contractor or IRS-related lien. It’s the title search performed by the title company that will uncover these judgments and liens.

Easements and leases: Another important finding from a title search is an easement, whereby another party is granted access to the property you’re buying. Existing leases might also turn up, which will specify terms that need to be addressed.

Abstract Preparation and Title Opinion

Once a complete and thorough title search has been performed, a title examining professional from the title company will review the findings. It’s this expert who will draft a legal document outlining all the property ownership history, including past transactions, inheritance findings, pending litigation, and tax sales. The preparation of an abstract will convey the current status of the property and subsequent insurability of the purchase, sale, or refinance.

Acting Escrow Manager

In addition to conducting title searches, the role of a title company can also be that of an escrow officer. For those transactions that might have escrow funds or documents, the title company can be the agent and responsible facilitator of collecting, holding, and disbursement of those funds. It’s the title company that will verify and release deeds and monies in accordance with written instructions agreed to by the buyer and seller.

Closing Agent

When you work with a title company as part of your real estate transaction, the title company will also then act as the closing agent on closing day. This means that a closing agent representative from the title company will step in as a third-party professional to walk both the buyer and seller through the closing process. The closing agent will collect all the appropriate signatures on closing documents and will issue checks and necessary payments, along with the recording of all finalized transaction documents, including mortgages and deeds.

Insurance Provider 

Title companies also act as independent insurance agents, whereby they issue title insurance policies on verified and properly executed property transactions. The premium payment to secure coverage will go to the insuring company, which will assume the risk of any loss suffered during the policy coverage terms. 

Here’s why title insurance is essential in any real estate transaction:

Ownership disputes are expensive. Most people, even those in great financial positions, would not be able to afford the necessary legal fees required to pursue or defend in litigation associated with property ownership disputes and claims. Having title insurance means if any ownership disputes do arise after you take ownership, the insurance company will assume the bulk of the financial burden to defend.

Peace of mind for a few hundred dollars. Even in the best-case scenarios, issues can arise, especially when you’re dealing with older properties that have exchanged hands multiple times over decades. Title insurance is the peace of mind you can enjoy for a few hundred dollars.

Settle the ownership debate. It’s happened before whereby an individual comes forward claiming ownership of your property. If the real estate has a long line of transactions in the past, and a family member of a previous owner believes they are entitled, it’s the title insurance policy that will protect your interests.

Choosing the Right Title Company Partner

Before you decide to work with a real estate agent, a real estate attorney, a home inspector, or a lender, you do your homework to review industry experience and compare pricing. You’ll want to take the same evaluation approach when selecting a title company partner. You might be advised to work with one company over another, but ultimately, you’ll want to vet each title company partner before committing. Look for a title company that can offer all the services you need, including those we mentioned above. Not all companies will provide all these services. Also, look for those with efficient digital resources and guarantees, along with great references and testimonials.

Now that you better understand what the role of a title company is, you can be more confident in selecting the right title company partner. And before you make any official decisions, get in touch with New Door Property Transfer!

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