Who Needs a Title Company?
Title Companies: What Home Buyers Need to Know
A title company makes sure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title.
Title companies also often maintain escrow accounts – these contain the funds needed to close on the home – to ensure that this money is used only for lien and encumbrance clearance, settlement and closing costs, and may conduct the formal closing on the home. At the closing, a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute monies. Finally, the title company will ensure that the new titles, deeds and other documents are recorded with the appropriate entities.and returned to the parties in said transaction.
Primary Responsibilities of a Title Agency
Perform title searches
Provide valuable information and advice
Issue title insurance policies
Manage and perform the closing
Handle escrow requirements at closing
Record the deed, mortgages and all other required documents after closing.
How does a title company determine that a title is valid?
The title company makes sure a property title is legitimate, so that the buyer(s) may be confident that once they buy said property, that they are the rightful owner of the property. To ensure that the title is valid, the title company will do a title search, which is a thorough examination of all public and property records to make sure that the person or company claiming to own the property does, in fact, legally own the property and that no one else could claim full or partial ownership of the property.
During the title search, the title company also looks for any outstanding mortgages, liens, judgments or unpaid taxes associated with the property, as well as any restrictions, easements, leases or other issues that might impact ownership. The title company and/or lender may also require a property survey, which determines the boundaries of the plot of land that a home sits on, whether the home sits within those boundaries, whether there are any encroachments on the property by neighbors and any easements that may impact an ownership claim.
Before a title company issues title insurance, it will prepare a title commitment, which lists a short summary of what it found during the title search (basically, this is the history of the ownership of the property). Then, the title company will issue a title policy after closing and the clearance of all encumbrances , which is a insurance policy to insure the title.