What Does A Title Company Do?

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In the early days of American history, when you wanted to buy property, a conveyancer handled the transaction. Part of their job was to find out if the property title was “unencumbered.” If a property is unencumbered, it means no one other than the seller has ownership rights to it, and there are no liens on it, meaning nobody else can take the property to pay a debt. But there was no guarantee or insurance that held conveyancers accountable if they were wrong.

Today’s title companies research property titles just like conveyancers did, in what’s known as a title search. But since the late 1880s, they’ve also provided title insurance. That’s their guarantee that if a problem turns up that they didn’t find, you’re protected.

A house title is the ownership record of a property The title shows who’s owned the property in the past, contains a physical description of the property and shows any liens on it. If you just bought the home, your mortgage will be on the title as a lien. It’s different from a deed, which is a document you get at closing that states you own the property.

The title company is a third party that works on behalf of both the lender and the buyer. You hire them to research and insure the title of the home you’re buying.

Why is that important? Let’s say you buy a home without hiring a title company. Later on, you find out the seller inherited the home when his father died and actually only owns half of the home. The other half of the inherited home belongs to his brother, who turns up on your doorstep wanting his 50% of the property. You can imagine what an unpleasant situation that would be for everyone. The title company and the title insurance policy you purchase from them will protect you from any liability and is an important part of the closing process.

Now that you know what a title company is and why they’re important, here’s what you can expect for your money.

Chain Of Title

Title companies will research what is called the “chain of title,” or the full history of the home’s ownership. A search from a title company would have revealed the second owner and stopped the sale before you close on the mortgage. They also look for existing liens, so you won’t find out the hard way that a contractor never received payment for past work completed on the home and is now expecting payment from you, the new owner. They’ll also make sure all property taxes are paid in full.

Title Research And Property Survey

Your title company will conduct a property survey. Required to close on a home in most states, surveys ensure that the home occupies only the space indicated on the title. It goes the other way as well; you want to know if your neighbor’s fence is actually on your property.

When research is complete, the company provides a report called a “title abstract.” You and your lender will get a copy to review before you close on your home. The abstract is not your title insurance policy. That’s a separate document you’ll get from your agent.

Title Insurance

Title companies provide two kinds of title insurance policies: one for you, the buyer, and one for your lender. Because your lender has a financial interest in the property, title insurance protects them the same as it does you: financially and legally, if someone comes forth with a claim for the property that was missed in the title search.

Generally, the seller of the home you’re buying pays for your title insurance policy, and you pay for your lender’s policy. But unlike most insurance policies that require you to pay a yearly or monthly premium to keep your coverage, you only have to pay title insurance once when you close on the property. You’re then covered for as long as you own the home.

Determining Who Holds The Title

It’s important to work with your title company to make sure that the wording on your title accurately describes who has the right to transfer ownership. Your title phrasing may also affect how you pay property taxes and fees if you sell your home in the future.

If you’re not married and you’re the only one on the title, it’s easy: you hold the title in sole ownership. But if you’re married, or live in a community property state, it gets more complicated. Your title company will help you understand what’s best for you and what the title should say.

Closing

Title companies usually manage the closing on your home. This service may be called “settlement.” They appoint a signing agent or real estate attorney (depending on what your state requires) to review all closing documents and finalize the deed and title transfer.

Funding

Title companies may hold and manage money in escrow, with the help of an escrow agent. An escrow account is a savings account managed by a third party – in this case the title company – which distributes payouts under certain conditions.

Escrow accounts are common in real estate transactions because mortgage lenders want to make sure that you have enough money for certain expenses. For example, if your lender requires a certain number of months’ worth of expenses held in escrow, a title company will likely manage this account on behalf of both you and your lender.

All parties involved in the process of buying a house will need to send or receive funds related to the transaction. Work closely with the agent from your title company; when you need to transfer funds, they’ll help guide you to the safest and most convenient methods.

Title companies work to help buyers close on properties without issue. If you’re nearing closing or are starting to look for a title company, it’s normal to have a few questions. Here are some of the most common questions people have.

Do I have to work with a title company?

While working with a title company is required by mortgage lenders as a condition of issuing the loan, it isn’t required by law. That said, it’s always a good idea– even if you’re paying cash for a property – since the title company will research the property in detail to make sure the sale can proceed.

What documents do title companies need at closing?

The title company is responsible for preparing and providing both buyers and sellers with the necessary documents. Typically, buyers will need to bring a few standard documents like proof of insurance and their photo IDs, but the title company and your real estate agent will be able to let you know if you’ll need to bring anything else with you.

What does the title company do for sellers?

Though title companies primarily benefit buyers, they help sellers by handling all paperwork, coordinating the closing process with the buyers and negotiating any settlements or lien payouts to help the closing proceed.

Can title companies remove liens?

Title companies themselves cannot remove liens but they can help sellers negotiate and settle with any lienholders uncovered during the title research process. Ultimately, it’s up to the seller to determine the best course of action and cover any payments or settlements.

Who picks the title company?

The buyer and seller each have representation from a title company. Neither the buyer or seller is obligated to use one recommended by the other. You’re free to ask for recommendations from your real estate agent or lender if you’re not sure which company to use.

What types of issues can the title company uncover?

Title companies are adept at finding any issues that might keep a home from legally being sold. These problems include:

• Liens
• Unpaid fees for work performed
• Undisclosed owners or heirs with claims to the property
• Special assessments on the property
• Outstanding loans on the home
• Etc.

What happens if the title company uncovers issues with the property?

If the title company uncovers any issues with the property, they’ll notify both the buyer and the seller. Typically, these issues may cause the sale to fall through but every possible effort to fix the issue and continue with the home sale will be made on both the buyer and seller’s behalf.

Your title shows who’s owned the property in the past, contains a description of the property and shows if there are any liens on it. Your title company is a neutral third party hired by you to research and insure the title of the home you’re buying. Plus, they'll manage the closing of your home.

Amrock, LLC, a title company doing business in all 50 states, has more than 20 years of experience and offers a single point of contact, plus easy and reliable communication, extended hours and the freedom to close on your schedule. Call (888) 848-5355 to learn how Amrock can help you complete one of the biggest deals of your life.