If you’re in the market for a home and are under contract to close, then you’ve probably been told to find a title company.
So, what does a title company do and why do you need one? Read further!
What is it?
In Real Estate, a “title” refers to the legal right to ownership of a property. This will be transferred from a seller to a buyer through the deed to the property.
Typically, the person holding the deed to the property also holds title and is considered rightful.
The new owner must also be able to own the property “free and clear”. This means that any other claims to ownership must be resolved before a transfer of ownership can take place.
Common title problems include an ex-spouse whose name is still on the deed or financial claims such as a lien or unpaid taxes on the property.
What does a title company do?
A title company has various roles and responsibilities. These include:
- Title Search: Once an agreement of sale is sent to a title company, they will perform a title search. They will look for anything that could halt the buyer’s rightful ownership of the property.
- Property Survey: They will order a property survey using a third-party provider. This defines the boundaries of the plot of land where the home is located.
- Title Report: Once a title search and property survey has been completed, they will put together a title report. This spells out the results of the search, including any issues that need to be resolved.
- Issue Title Insurance: Once existing issues are resolved, they will issue a title insurance policy. This protects the owner from financial harm in any legal issue that results from a dispute over the ownership of the property.
- Hold Escrow: Most title companies serve as escrow agents. In Real Estate, the escrow agent is a neutral third party in charge of holding funds exchanged between the buyer and seller in the transaction.
- Facilitate Closing: The title agent will typically facilitate the settlement or “closing”. They will make sure that all paperwork has been signed and that funds have been disbursed properly.
Why do you need it?
Title companies are responsible for making sure that the title to the property can be transferred from the seller to the buyer without issue.
The title underwriter will ensure that the purchaser doesn’t inherit unwanted problems. This includes liens, claims, and unpaid taxes.
They will offer protection against these issues through a title insurance policy. This will ensure that the seller or owner has the right to sell the land and all problems are cleared.
Talk to your Real Estate agent about deciding which title company is right for you and your homebuying process.