When you plan on buying a home, you must verify whether the seller has legal rights to transfer the property. Purchasing a home with a defective title can bring you a host of legal problems. And that’s where a real estate title company comes into the picture.
From providing title services to handling closing procedures, title companies play a crucial role in ensuring a successful real estate transaction. In our blog, we have explained what a title company does and its various responsibilities in real estate transactions.
🚀 Key takeaways
- Title company is a neutral party that oversees the transfer of property rights from the seller to the buyer. It chiefly verifies the validity of the title and helps identify any associated issues.
- Title companies offer various services such as title search and examination, property survey, escrow, title insurance, settlement services, etc.
- Buyers generally choose the title insurance company.
What is a Title Company?
A title company is a third party that oversees the transfer of property rights from the seller to the buyer. The title company chiefly verifies the validity of the title and helps identify any associated issues.
Further, the title company offers protection to homebuyers and mortgage lenders from past disputed ownership issues through title insurance.
What Does a Title Company Do?
Title companies ensure the transfer of ownership from seller to buyer is legitimate and free of any legal issues. Title companies offer the following services:
1. Title Search and Examination
A thorough research is conducted into the property’s ownership history to identify any liens, encumbrances, or other claims that may affect the transfer of ownership. Further, the title company carefully vets the prior transfer documents.
It helps buyers make an informed decision by ascertaining whether the seller has a clean and marketable title. Likewise, it is crucial to lenders who intend to finance the transaction.
2. Title Insurance
Title companies offer owners title insurance and lenders’ title insurance policies. Basically, it safeguards them from unforeseen legal issues associated with a defective title resulting from liens, forged documents, undisclosed heirs, or errors in public records.
The purpose of a title policy is to protect buyers and lenders from potential monetary losses that may arise as a result of a bad title.
3. Property Survey
A property survey records the accurate measurements of the property’s boundaries and the condition of the property. Accordingly, these findings are recorded by the property surveyor in a property survey report.
It is your safest bet against any unpleasant surprises you may be unaware of. By mapping the precise boundaries of your home, a property survey report helps to keep issues such as easements and boundary disputes at bay.
4. Escrow and Closing or Settlement Services
Title companies also act as escrow agents, by holding and disbursing funds and documents on behalf of the parties involved in the real estate transaction.
Concurrently, they ensure proper execution and recording of documents, coordinate with all parties, and finalize transactions by meeting requirements.
5. Recordation of Documents
Title companies are responsible for ensuring all legal documents related to the real estate transaction are duly recorded in accordance with local laws.
Proper recordation is essential to establish legal ownership and protect both the buyer’s and lender’s interests.
6. Preliminary Title Report
Title agencies prepare a preliminary title report, also known as the title commitment, which provides a detailed finding on the title that includes any problems with the title or any actionable required to fix the title.
Thereafter, the buyer is required to provide the preliminary title report to the mortgage lender.
What Does the Title Company Do After Finding Title Defects?
A house title company takes proactive steps to resolve any title issues discovered during the title search and examination process.
They work diligently alongside real estate attorneys, lenders, and other parties to clear any title issues, such as liens or encumbrances, discovered during the title search and examination process.
Title companies have the experience and knowledge to navigate complex legal issues. Furthermore, they find solutions to ensure a free and clear title for the buyer and lender.
How to Choose a Title Service Company and Who Picks It?
Title company service fees are standardized in some states. In this case, the policy buyer must consider which is the best service offered by competing title companies.
You can search for “title companies near me” on Google and check out their reviews. Additionally, you can ask for your real estate agent’s recommendation. Certainly, your real estate agent can help you find a suitable title agent as per your requirements.
Buyers generally pick the home title company to purchase the title insurance policies for themselves and for the mortgage lenders.
How Much Do Title Companies Charge?
The title company services costs differ from state to state depending on the scope of services you choose. The scope of services includes title search fees, escrow fees, recording fees, real attorney fees, and title policy fees.
Under title service costs, the title insurance costs also depend on state regulations. Title policies generally cost about 0.5% to 1.0% of the home’s purchase price. Of the 2 title policy coverages, the enhanced policy costs 20% more than the standard policy.
👉 Who Pays Title Insurance: Read further to know who pays title insurance costs!
Bottom Line: Do You Need One?
Many buyers and sellers may wonder if hiring a property title company is necessary for a real estate transaction. Albeit not legally required in all states, title companies are undoubtedly crucial in facilitating a successful real estate transaction.
They ensure legal compliance, detect undiscovered title issues, and at last, aid in a successful closing.
To conclude, consider the services of a reputable closing title company in order to safeguard your interests, protect yourself from future legal issues, and most importantly, preserve your peace of mind amidst the hassle.
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Frequently Asked Questions
1. What do title companies do?
The purpose of title company is to ensure the transfer of ownership from seller to buyer is legitimate and free of any legal issues. The title company's services include title search, title insurance, property survey, escrow, settlement services, etc.
2. What does a title company do at closing?
At closing, title companies ensure proper execution and recording of documents, coordinate with all parties, and finalize transactions by meeting requirements.
3. Who represents the title company and facilitates the final transaction?
A title company typically has a closing agent or escrow officer who represents the company and facilitates the final transaction.
