What is the Purpose of a Title Company?
Selling or buying a home is not as simple as handing over money and signing on a dotted line. Property rights will need to be transferred from the seller to the buyer, which is where a title company will come in handy. “Title” is just a legal term that includes all the uses, rights, and privileges that come with the ownership of a property. You might be wondering what a title company does. In short, when a property is sold, it will conduct a title search to offer settlement services to aid in the closing transaction. It will also help to provide title insurance to the home’s new owner and mortgage lender.
In this article, we will discuss the purpose of the title company.
What is a Title Company in the World of Real Estate?
In the world of real estate, a title company is a functioning independent party that is involved in the transaction of a home for sale. It is entirely separate from the lender, the seller, and the buyer. During the sale of the home, a title company is responsible for the transfer of the property rights from one owner to the next while helping to clear a path for the process to go forward. Services a title company performs include the following:
- Title Search
- Holding onto Escrow Funds
- Conducting Property Surveys
- Discovering Encumbrances
- Issuing Out Title Insurance
- Preparing Closing Statements
What Does a Title Company Do in Real Estate?
As its name implies, a title company will ensure that the home’s title is without any defects or things that might harm the buyer’s use of the home. Below are common title defects a title company can help root out and help you to fix:
- Liens
- Restrictions
- Fraudulent transfers
- Unknown Heirs
- Unpaid Taxes
- Mortgages
- Court Judgements
To check for the formerly listed defects, the title company will perform a full search for public records or transaction history for the title as well as the property. The company has to verify who has the title to the property and who “qualifies” for that title. Title companies can also assist with title insurance that will protect the mortgage lender if the title issues should surface.
Who Pays for Title Company Services, the Buyer or Seller?
The answer to that question will vary depending on what state you reside in. However, closing costs are often negotiable. The seller and buyer can negotiate who will pay for the services of a title company or whether the costs can be split between them both before the sale contract is signed.
How to Choose the Best Title Company for Yourself?
Title companies are typically recommended by the buyer’s real estate agent, lender, or real estate attorney in a particular home sale. You aren’t required to select the title company referred to you, and you can opt to ask around for different recommendations while spending time researching and speaking with more than one company to cross-compare. Be sure that the company you choose is both accredited and licensed in your state. In addition, prepare to ask some of the following questions:
- How long has your company been in business?
- Who is the underwriter of your company?
- What is the total cost of your liability insurance?
- Have you had any past claims?
- How much title insurance would you recommend I need and why?
We recommend selecting a title company based on the answers given to the questions asked above, as well as the customer service, reputation of the company, and familiarity between all the professionals involved in the overall transaction.
Conclusion
As with all the steps along the homebuying process journey, a local real estate agent can guide you through searching for an ideal title company to work with. Ask your agent for trusted recommendations or their personal experiences with different companies; both will be big nationwide players and small local operations.