What is a Title Company?
A title company is a key part of a real estate transaction. Along with buyers, sellers, lenders, and real estate agents, they are involved in the process throughout the entirety of the transaction and their role cannot be over emphasized. Here is a quick breakdown of just what a title company does to make deals come together successfully.
Title searches. As “title” is in their name, a substantial role of a title company is to research and ensure clear title. This means they search through property records to make sure that there are no existing liens or judgments on a property or that those liens are paid off at the time of closing so that a buyer can get a clear title in the sale. The research is critical and a title policy is an insurance policy for the buyer should any missed issues ever arise down the road. A seller must have a legal right to sell the property to a buyer and title searches and insurance help serve as a guarantee.
Money handling. One of the biggest functions of a title company is to collect earnest money and hold them in an escrow account. They cannot release these funds without approval of all parties, so these funds are in a neutral safe zone until everyone agrees on release or until they get applied per the contract on the closing statement (know as a HUD-1). Once a sale is closing, title companies also accept payments from buyers and lenders and then use those funds to pay off a good number of other parties, not the least of which are the seller and the seller’s mortgage company. A title company to outline the use of all funds in a transaction and pay off existing mortgages, liens, contractors, tax offices, insurance companies, and more.
Data collection. Title companies receive a final version of the contract, receipt it as the final version, and accept all amendments. They assemble all of the pieces of the transaction as they come together – from home warranties to loan specifics to surveys and mortgage payoff information. When closing instructions arrive from a lender, title companies assemble all of the parts and put together the packages for each party. From tax statements to child support liens to homeowner’s association covenants and bank routing information – everything must pass through the title company.
Neutrality. Title companies remain a neutral third party and serve simply as a processing hub for information. They do not represent one party more than another and simply process documents as they are set out by the contract and by other parties. They assemble loan documents and closing instructions from the lender, but do not make the rules or dictate terms. Sometimes this can be a refreshing break and an extra set of eyes on a transaction that ensures compliance by all.
Closing. Most transactions will actually be closed at a title company office. The closer will assemble all of the documents necessary for closing (deed transfer, loan documents, etc.) and meet with buyers and sellers to get these documents signed and notarized. Experienced closers have gone through hundreds or thousands of these closing sessions and are knowledgeable about the towering stacks of documents and are able to explain them in a manner that is clear to everyone involved. It is common for buyers and sellers to sign separately and in many instances it is even possible to arrange for closing by mail-out or mobile notary if one party is unavailable to close at the actual title company office. Of course, title companies will help to arrange all of this as well.
As the rates for title insurance are regulated by the state (Texas Department of Insurance), the fees for services from one company to another can only vary ever so slightly. Instead, many companies set themselves apart with excellent customer service or finding ways to go the extra mile for clients. Whether it is working after hours or weekends or providing complimentary pens and fancy beverages, each title company has a unique approach to satisfying its customers, but what remains the same is the imperative role they all play in making a real estate purchase a fruitful one.
image courtesy of sonnysawyer43