What exactly is a Title Company & why are they are necessary?
The first thing a title company does when entering into a real estate transaction is a title search. They investigate the property to make sure when the buyer of the home procures the title they will legally be the homeowner. A title search will make sure there aren’t any claims on the property, like outstanding mortgagees, or liens. They will ensure that the property tax has been paid, and the utilities (like water bills or homeowners association fees) are up to date. The title company will write these findings in a document called the Title Abstract.
Why is a title search important?
Most lenders require a title search before entering into a mortgage on a piece of property. It ensures that there are no legal restrictions on the property, which means the lender’s investment in the property through the mortgage is safe.
Many lenders will also require a property survey. The title company also completes this task. A property survey draws out the property lines to see how large the piece of land is and if neighboring properties have encroached upon the property lines. If there are any problems with the property survey, the title company will contact the real estate agent and lender. If there aren’t any problems with the property, the title company will present this to the buyer during closing.
Why is a property survey important?
Lenders require a property survey before they enter into a mortgage. They want to know the property is actually worth the amount they are lending to the buyer for the mortgage.
Title Opinion Letter
After completing the title search and property survey, the title company creates a legal document stating the title is valid and available to sell to the buyer. This document is called the Title Opinion Letter.
Most title companies offer two types of title insurance. The first is lender’s insurance. This protects the lender or bank from any claims or legal fees that might come up from property ownership disagreements. The second type of title insurance is that of owner’s insurance. This protects the buyer from disputes over home ownership. Sometimes owner’s title insurance has to be purchased, other times it is free.
Why is title insurance important?
Owner’s title insurance makes sure that if the title was incorrectly sold to the buyer, and they are not actually the owner of the property, they will be reimbursed or paid the value of the home.
The title company may also act as an escrow agent for the real estate transaction. This means they will be an impartial party and pay money to the correct vendors, banks and parties. We (the best home warranty company) will explain this more in the next section.
Settlement Agents at Closing
At the end of the real estate transaction, the title company acts as an escrow agent and a settlement agent. They prepare all legal loan documents, like the deed, tax certificates, title insurance policies and other state law required documents. They explain these documents to the seller and buyer during closing. Then, when acting as escrow agents, they collect the money from the buyer and seller and make sure the money is transferred to the correct parties, be that to the lender to pay off a mortgage, or to vendors. Finally, after everything has been signed and made official, the title company presents these documents to the court and files them to make the transaction legal
All information herein is for informational purposes only and compiled from internet search